China’s New Era Mechanism for Common Prosperity

 

President Deng Xiaoping opening the Common Prosperity plan of China

President Anura Kumara Dissanayake to visit China in January:

China’s New Era Mechanism for Common Prosperity

Signaling a balanced approach to managing ties with both Asian giants, Sri Lankan President Anura Kumara Dissanayake is set to visit China in January 2025, within weeks after his official visit to India in the third week of December 2024.

China being Sri Lanka’s reliable economic partner, the visit reflects his strategy to strengthen bilateral relations and seek support for Sri Lanka’s economic recovery. Dissanayake’s aim to secure foreign investment, technology, and tourism support while addressing Sri Lanka’s debt challenges. China, a significant investor in Sri Lanka’s infrastructure, has expressed its willingness to deepen cooperation under Dissanayake’s leadership. Analysts suggest that the President’s leftist ideology aligns with fostering closer ties with China, but his pragmatic stance seeks to maintain a balance with India’s strategic interests in the region.

Dissanayake’s diplomatic approach is seen as crucial to navigating the economic and geopolitical pressures facing Sri Lanka. The outcomes of these engagements with India and China will shape the country’s recovery path and its role in regional dynamics.

China’s push for “common prosperity” under the leadership of President Xi Jinping reflects the nation’s resolve to address income inequality, foster equitable growth, and modernise its economic model. As part of this vision, the government has introduced a range of policies, mechanisms, and reforms to promote wealth redistribution, social equity, and sustainable development. This policy shift represents a key element of China’s “New Era” strategy, aiming to balance rapid economic growth with inclusivity and fairness. This is an area Sri Lanka could get huge benefits from the Chinese experience.

《Sugeeswara Senadhira Daily News December 20, 2024》

Economic reforms

Common prosperity is not a new concept in China; it was first articulated by Deng Xiaoping during the era of economic reforms in the late 1970s. Deng’s vision emphasised that “some people and regions can get rich first” to spur overall development. However, after decades of rapid growth, income disparities between rural and urban areas, as well as between regions and social classes, have become a pressing issue. Xi Jinping has revived and redefined this goal, focusing on reducing inequalities while maintaining economic stability.

For the National People’s Power (NPP) Government which emphasises the imperative of equal distribution of wealth and upliftment of rural and urban poor, the Chinese concept for achieving Common Prosperity will be a solid path to emulate. The core mechanisms adopted to implement this concept include wealth redistribution through taxation and transfers, tax reforms targeting high-income earners and corporations to address the growing wealth gap, enhanced progressive taxation, property taxes, and measures to curb tax evasion among the wealthy and social safety nets, such as improved pensions, healthcare, and education subsidies, aim to uplift low-income groups.

Major steps taken for rural revitalisation and regional development are measures to close the urban-rural divide, investments in infrastructure, agricultural modernisation, and rural industries seek to increase rural incomes and enhance quality of life and targeted funding and policy support to reduce geographic disparities in least developed provinces.

To fast track the Concept of Common Prosperity, Chinese government has encouraged philanthropy and Corporate Social Responsibility (CSR). The government encouraged wealthy individuals and corporations to contribute to social causes. Tech giants and private enterprises are being urged to support social programmes, invest in community development, and promote inclusive hiring practices. They also introduced additional distribution mechanisms existing primary (market-based) and secondary (taxation and redistribution) income distributions such as voluntary contributions through charity, foundations, and social initiatives.This mechanism emphasises moral responsibility and societal values over mere profit-making.

Another crucial step was to reform the private sector by implementing policies to regulate monopolies and ensure fair competition aim to create a level playing field.The crackdown on tech firms and real estate developers reflects a broader goal of curbing excessive corporate influence and prioritizing social good over profit.

Sustainable programmes

Together with these steps, sustainable programmes were launched to boostemployment and education through vocational training programs and reforms in the education system are designed to enhance skills and create more equitable opportunities for upward mobility.Policies promoting job creation, particularly in green industries and high-tech sectors, help address unemployment and underemployment.

While taking lessons from the successful Common Prosperity programme of China, it is advisable to take safeguards against possible pitfalls that could adversely impact economic growth. Over-regulation of the private sector risks stifling innovation and slowing GDP growth. And businesses may become cautious about investments due to perceived unpredictability in policies. The scale and complexity of addressing entrenched inequalities pose significant challenges. Excessive state intervention could harm market dynamics, leading to inefficiency. Hence, balancing redistribution with economic liberalisation remains a delicate task.

China’s pursuit of common prosperity also has international ramifications. As a major global economy, its policies can influence trade, investment, and global inequality discourse. The emphasis on reducing disparities aligns with global calls for sustainable and inclusive development, offering a potential model for other nations grappling with similar challenges.

China’s “New Era” mechanism for common prosperity marks a significant shift in the country’s developmental priorities. While challenges remain, the initiative underscores the government’s commitment to addressing inequality and fostering a more inclusive society. If implemented effectively, it has the potential to serve as a blueprint for balancing growth with equity in a rapidly changing world.

President Dissanayake is in a position to get every possible support from President Xi Jinping for implementing a comprehensive prosperity package in Sri Lanka designed under the Chinese leader’s concept of ‘New Era Mechanism for Common Prosperity’.⍐