Increased incomes, social mobility crucial to common prosperity

Common prosperity is an essential requirement for the country’s modernization. And China must make greater efforts, especially in three areas, to achieve that.

China must make the cake bigger, and divide it in a fair manner. Given that development is the key to solving all the problems, China needs to keep economic growth within a given range and tap all the potentials.

It also needs to keep people’s income growth in step with national economic growth. Since the 18th National Congress of the Communist Party of China in 2012, China’s GDP growth and household disposable income growth have been synchronized, thus helping eradicate absolute poverty.

To maintain this synchronized growth, China should ensure that the increase in per capita GDP is reflected in people’s incomes.

And the national income distribution structure should be continuously adjusted to increase the share of residents’ incomes.

Currently, China’s Gini coefficient, an indicator measuring the inequality in income distribution, is around 0.46, above the international “warning line” of 0.4. The experience of other countries shows that primary distribution of wealth is usually not enough to keep the Gini coefficient below 0.4. Since China has entered a new stage of socialist modernization, it should use redistribution to narrow the wealth gap.

The country should also take measures to promote and increase social mobility, in order to expand the middle-income group.

The flow of people from the countryside to the cities looking for better-paying jobs has to a great extent powered China’s fast-paced development.

With China entering the stage of medium-high economic growth, however, the flow of workers from the countryside has slowed down. Therefore, effective measures should be taken to remove the institutional obstacles to the mobility of workers and talents.

China must also ensure that everyone has equal access to social welfare programs. Countries with per capita GDP of $10,000-$25,000 have seen their government spending on social welfare jump from 26 percent to 37 percent of GDP.

By 2035, China’s per capita GDP is expected to increase from $10,000 to $23,000. So, it should strengthen its welfare system based on its national conditions.

In the next 15 years, China’s economic development should focus on the supply side to maintain potential growth capacity and the demand side to ensure the continuous improvement in people’s consumption power and achieve a healthy growth rate.