Common prosperity key to Chinese modernization

Common prosperity is a worthy goal not just for China but the world. The goal is gaining more importance in China ever since it was underlined in a report submitted to the 20th National Congress of the Communist Party of China this month.

To understand common prosperity, we first need to discuss it in the context of the nation's pursuit of Chinese modernization.

To be sure, the rest of the world is also pursuing modernization, but progress and characteristics vary from country to country. There are a large number of countries, mainly developing ones, including China, still striving to achieve modernization, while some developed countries coasting on capitalism have already achieved a high level of modernization.

However, many of these developed economies are facing the phenomenon of "rich in wealth but unfair in distribution". Although the economic size of each of these countries is large, the unfair distribution of wealth has deepened social instability, polarized polity and sparked populism. This is particularly true of some Western countries. Such woes are closely related to the widening wealth gap.

It is widely acknowledged that achieving peaceful, stable development and relatively reasonable and fair distribution are key to countries securing a stable international environment. The disorder seen in the global political and economic systems nowadays, especially in some developed economies in the West, is partly due to the rise of populism.

The phenomenon of "rich in wealth but unfair in distribution "stoked populism. The rapid economic globalization of the past few decades has also intensified the problem of unfair distribution among different social classes in these countries. The unfair distribution of benefits generated by globalization has also unsettled other countries.

Speaking of distribution, common prosperity is not about egalitarianism. Nor is it about "robbing the rich to help the poor".

To achieve common prosperity, first of all, primary distribution, with enterprises playing a major role, is of utmost significance. In this context, employment functions as the major gear. Then, supported by an environment conducive to activating the vitality of enterprise development, enterprises will be able to make the economic "cake" bigger. With market players making the cake increasingly bigger, common prosperity will follow, resulting in the equitable distribution of the cake.

China is also ramping up its efforts to achieve Chinese modernization, with common prosperity being labeled as not only an essential requirement of the socialism it is building, but also a key mission listed in its current economic and social development plan.

However, given its large population, China will take some time to achieve common prosperity. It should also be noted that common prosperity is a dynamic process of ups and downs, with affluence levels changing in accordance with economic conditions.

Therefore, common prosperity represents an inclusive and open development model. Suffice it to say that development is still the most fundamental requirement to achieving common prosperity.

To sustain its peaceful and stable domestic development trend, China must continue its efforts in maintaining a good environment to encourage innovation, and give a stronger boost to enterprises undertaking sci-tech innovation.

In the process of reform and opening-up, enterprises are seen as one of the major pillars supporting not only the development of the market but also that of the whole country. To create high-quality enterprises that can grow into potential industry leaders globally, China should establish favorable systems like minor fault-tolerant mechanisms. That will provide enterprises with an environment conducive to innovation. Similarly, the private sector needs a more favorable development space to better cultivate talent.

To ensure that benefits brought by growth reach as many people as possible — it is one of the goals that must be achieved to realize common prosperity — a good development environment and development space for enterprises should be given priority. This will encourage market players to create and provide more employment opportunities.

Among them, smaller enterprises have become particularly important. According to the latest national economic census, registered business entities among China's small, medium- and micro-sized enterprises account for 99.8 percent of the total. Employment generated by these enterprises accounts for 79.4 percent of the jobs created by all companies.

Since the majority of these smaller enterprises are in the private sector, it is necessary to encourage the development of the private sector and boost the vitality of these market entities.

With enterprises functioning as the main gear in the primary distribution for common prosperity, redistribution comes next. Redistribution means the government, by way of fiscal measures, transfers capital or assets between different income groups through various channels, on the basis of the results of primary distribution — a process of the government readjusting factor income.

In the redistribution link, the government should ensure lazy people don't game such a distribution system. China's redistribution system should be established in accordance with the country's particular conditions and should encourage people to become prosperous through sheer hard work.

The principle of "getting more by working more" encourages diligence among the workers, promotes fair opportunities, increases the income of low-income earners and expands the middle-income group. In this regard, the government should ease the tax burden on low-income earners and smaller companies — something that China has been doing, especially in recent years.

Let's now turn to tertiary distribution, which encourages high-income earners to donate resources and wealth by way of charity and public welfare. To facilitate tertiary distribution, it is necessary to coordinate the relationship between supervision and sectoral development, and secure a market-oriented, law-based and globalized business environment.

Assuming no major disruptions rock the market order, the only way to ensure more enterprises participate in charity and public welfare, and form a virtuous circle, is to allow them and capital to develop healthily under the institutional framework of laws and regulations.

Last but not least, in addition to hard infrastructure like railway projects and bridges, "soft infrastructure" is also very important for achieving Chinese modernization and common prosperity. This would mean stress on social security, medical care, education and public housing. These are important social sectors that enhance overall stability.

The writer is a professor at the Chinese University of Hong Kong, Shenzhen, Guangdong province, and president of the Institute for International Affairs in Shenzhen. The views above are adapted from a Chinese article, and don't necessarily reflect those of China Daily.