There was a time around two decades ago when the notion circulated that the era of the China tea-leaf reader was drawing to a close. With the nation joining the World Trade Organization in 2001 and the economy becoming more transparent and rules-based, the value of specialists who could parse the arcane language of a closed political system and interpret its shifting nuances for a wider audience was thought to be diminishing. That was then. The minor flurry of debate set off by two missing words is a reminder of just how little has really changed.
The paucity of references to “common prosperity” at China’s biggest annual political gathering this past week stirred speculation the Communist Party leadership was backing away from a signature campaign that dominated public discourse on economic policy making through much of 2021. It’s a issue of keen significance for foreign investors, who have seen hundreds of billions of dollars wiped off the value of overseas-traded Chinese corporations as President Xi Jinping pushes to exert tighter control over private capital and reassert core socialist values.
Premier Li Keqiang’s annual work report gave only one mention to last year’s buzz phrase, which was rendered as “prosperity for all” in the official English version. It may be tempting to read too much into the vocabulary choices of a 12,000-word policy document that covers such wide ground, though over-interpretation is a hazard when studying a system that communicates its priorities through often-impenetrable slogans. Take the “Three Represents,” former President Jiang Zemin’s contribution to the communist ideological canon. Hardly an expression that rolls off the tongue, it was nevertheless one of huge importance, formalizing the acceptance of private entrepreneurs into China’s reform-era political structure. The lesson is that the supreme leader’s sloganeering is not to be ignored.
Hence the attention that was rightly paid to “ common prosperity” when the phrase started to appear in official language with increasing regularity last year. The term united under a single rubric several trends that had been apparent since mid-2020, all driven by a concern to address China’s widening inequality. These included: attempts to restrain property developer leverage and damp housing speculation; tighter regulation of technology companies — demonstrated most notably by the government’s 11th-hour intervention to pull a world-record initial public offering by Alibaba Group Holding Ltd.’s payments unit Ant Group in November 2020 — and official prodding of corporations and billionaire businessmen to donate to social causes.
The scale of the changes wrought by this campaign is vast. A wave of distress has swept through China’s developers, helping to send yields on the nation’s junk bonds to more than 25%. In technology, Alibaba alone has lost almost $600 billion in market value since its late-2020 peak, and co-founder Jack Ma, once China’s richest man and one of its most visible business personalities, has largely faded from public view. So the search for signs of whether the common prosperity push may be fading is understandable. But it’s a question that almost doesn’t need to be asked.
When the government embarked on this policy agenda, it was seizing on a fortuitous window for action. China’s economy had bounced back faster than those of its counterparts in 2020 thanks to its successful control of the Covid-19 pandemic. For the full year, it was the only major economy to grow. That created relatively benign conditions for policy makers to enact changes — such as restraining the property boom — that might reduce growth in the short run while helping to lay the foundations for more equitable development in the longer term.
That window has undoubtedly closed. In March 2022, China faces radically different circumstances. Growth has slowed for three straight quarters; the country is again battling to keep the coronavirus at bay and has a major outbreak on its doorstep in Hong Kong; and the real estate slowdown has been turning into a rout. Now the government faces the complicating factor of the invasion of Ukraine, with its unpredictable effects on commodity prices and the potential sanctions threat to Chinese companies with business in Russia.
It’s clear that the emphasis has to shift to growth. Premier Li affirmed as much in his closing press conference at the National People’s Congress on Friday. Li was asked about the common prosperity push, whether the government would put more restrictions on corporate behavior, and if it would take measures to alleviate the concerns of foreign investors. Li spent most of his answer on the last point, stressing the importance of free trade and foreign investment to China, and pledging that the country would continue to open.
Common prosperity won’t be jettisoned. Xi has put his name to the the task, and it is already part of the legacy he is trying to build as he bids for a third leadership term later this year. It’s no longer the number-one priority, though. China’s political system remains largely opaque. But some things are hiding in plain sight.
Bloomberg
