China said It will Fight “Excessive Income” and wants “Common Prosperity”

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Xi Jinping President of China
Xi Jinping President of China

China’s President Xi Jinping said explained at the finance and economic meeting Tuesday that the wealth should be for all. Jinping emphasized the idea of “common prosperity” which analysts suggest followed the regulatory crackdown on tech companies. 

The meeting revolved around the “reasonable adjustment of excessive incomes and encouraging high-income groups and businesses to return more to society,” state media said in Chinese, according to a translation by CNBC.

Additionally, Chinese leaders called for common prosperity. They argued that this means that not only a few people should live in prosperity while others suffer. It doesn’t include equal distribution of wealth but the plan revolves around making that possible in the near future through states, said the report. 

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Providing “common prosperity” has been an important discussion for Chinese politicians. The term means that the wealth should be moderate for all rather than a minority.

In a statement Yue Su, principal economist at The Economist Intelligence Unit said: “Considering that raising taxes on high-income groups and capital returns may curb investment and potentially lead to capital outflows, the Chinese government will not completely ignore the impact of redistribution policies on the economy.” 

Su added that privatization will probably be slowed down in public services including education and care, especially since the Chinese government is becoming stricter when it comes to prices and affordability. 

Income inequality among the 1.4 billion Chinese has emerged in the last few decades. For instance, the top 10% of the population earned 41% of the national income in 2015 compared to 27% in 1979 according to estimates published in 2019 by Paris School of Economics professor Thomas Piketty and a team.

According to the Chinese government, extreme poverty in the country has been eliminated completely by the end of 2020. They argued that this marked an important step to the longer-term pledges of the ruling of the 

Chinese Communist Party, which celebrated its 100th anniversary in July.

 “Elaborating on the ‘common prosperity’ objective, China has affirmed its effort to rebalance the economy toward labor, tackling social inequality with the redistribution, social welfare, taxes, and inclusive education,” Morgan Stanley analysts said in a report distributed Wednesday, noting a target — “to increase the middle-income group’s share of the economy.”