4.1 Characteristics of a Chinese-Style Common Prosperity Society

Going forward, China has the opportunity to realize common prosperity for every one of its 1.4 billion people and has increasingly favorable development conditions and a strong development capacity to further create a great innovation in human development. After creating a miracle of rapid economic growth and long-term social stability for more than 40 years, and building a moderately prosperous society with a population of more than 1.4 billion, China will once again create a new miracle on earth. At the same time, China will face many challenges. By leading the people, relying on them, and stimulating their creativity, the CPC will surely achieve the great goal of common prosperity for everyone.

After China achieved the ambitious goal of building a moderately prosperous society in all respects, General Secretary Xi Jinping promptly put forward the realization of common prosperity for everyone and made it a long-term development goal and task.

In February 2021, Xi further expounded the theory of common prosperity systematically and completely, stressing that “Adhere to the people-centered development ideology and unswervingly follow the road of common prosperity. The road to ruling a country begins with enriching the people. We have always firmly held the position of the people, stressing that eradicating poverty, improving people’s livelihoods, and achieving common prosperity are the essential requirements of socialism, an important manifestation of our CPC’s adherence to the fundamental goal of serving the people wholeheartedly, and a major responsibility of the CPC and the government.”Footnote 1

In August 2021, Xi, in a speech at the 10th meeting of the Central Financial and Economic Affairs Commission, pointed out that since the 18th National Congress of the CPC, the Party Central Committee has grasped the new changes in the stage of development, attached more importance to the gradual realization of common prosperity for everyone, promoted coordinated regional development, taken strong measures to protect and improve people’s livelihoods, won the battle against poverty, built a moderately prosperous society, and created good conditions for promoting common prosperity. Now we have reached the historic stage of firmly promoting common prosperity.Footnote 2 It is necessary to further answer the question, “What kind of society is a society of common prosperity? We argue that common prosperity has the following five important characteristics.”

First, a society of common prosperity is a society with higher productivity development. The liberation and development of society’s productive forces are the prerequisites for achieving common prosperity. The basic characteristics of socialist productive forces with Chinese characteristics can be summarized as a “one center, five dimensions” productivity system: the people as the center is the starting point, base point, and core point of the comprehensive development of productive forces; the “five dimensions” of productive forces are economic productivity, scientific and technological productivity, social productivity, cultural productivity, and ecological productivity. The functionalities of the five productive forces are: economic productivity is the material foundation; scientific and technological productivity is the intellectual support; social productivity is the guarantee of people’s livelihood; cultural productivity is the spiritual guidance; ecological productivity is the prerequisite for sustainable development; the five productive forces create five kinds of wealth: economic productivity creates economic wealth; scientific and technological productivity creates scientific and technological wealth; social productivity creates social wealth; cultural productivity creates cultural wealth; ecological productivity creates ecological wealth; ecological productivity creates ecological wealth. The five major productive forces are interrelated, promote each other, integrate with each other, develop in the same direction, peer development, win–win development, unified to serve the people-centered development goals, and further deepen reform is the key to promoting the five major productive forces to achieve leap-forward development.Footnote 3 Thus, we will continue to promote the common sustainable development of all people, create wealth together, share the fruits, and achieve the goal of common prosperity together.

Second, the common prosperous society is a modernized society with a much higher level of economic development. In principle, China will achieve the ambitious goal of socialist modernization 15 years ahead of schedule, i.e., significantly surpassing the expected goal of quadrupling per capita GDP from 2000 to $4000 (1980 prices) between 2030 and 2050, as set by Deng Xiaoping in 1987.Footnote 4 By 2035, China’s per capita GDP will reach the level of middle-income countries ($15,000–20,000 at current prices) and more than $32,000 international dollars at purchasing power parity 2017 international dollars.

Third, the society of common prosperity is a modern socialist society with richer connotations. We will achieve high-quality development, a better life for the people, and a higher quality of life based on building a moderately prosperous society in all respects. By 2035, China’s human development index (HDI) will reach a high level of human development by international standards.

Fourth, a moderately prosperous society is a socialist society in which people develop comprehensively. It meets people’s growing demands for a better life and their growing demands for democracy, rule of law, equality, justice, security, environment, culture, social security, and so on. By international comparison, it creates a new socialist modern society with “five in one.”

Fifth, the society of common prosperity is a socialist society in which the gap between urban and rural areas and regions continues to narrow. It realizes the integration of public services and public facilities in urban and rural areas, regional integration, and national integration.

In short, the core task of socialist modernization with Chinese characteristics through 2050 is to implement six five-year plans and gradually achieve the ambitious goal of common prosperity for everyone in several successive steps. To embark on a new “Long March,” we have the rare conditions of time, place, and human resources, but we also face great challenges, both foreseeable and unforeseeable.

As we enter the new era, China already has favorable political, economic, and social development conditions to realize common prosperity for everyone. Compared to building a moderately prosperous society for more than one billion people by 2020, as proposed by the CPC Central Committee 20 years ago, fully building a society of common prosperity for more than 1.4 billion people not only has a higher starting point for development but also has richer development experience and stronger development capacity.

4.2 Foundations of China’s Progress Toward a Common Prosperity Society

4.2.1 Achieving Common Prosperity Under the Leadership of the Communist Party of China

China’s greatest political advantage in achieving a society of common prosperity for everyone is its adherence to the overall leadership of the Communist Party of China.

First, the Party Central Committee has made an important strategic decision to promote common prosperity for everyone. In the Note on the Proposal of the CPC Central Committee on Formulating the 14th Five-Year Plan for National Economic and Social Development and the 2035 Visionary Goals, Xi Jinping pointed out that “common prosperity is the essential requirement of socialism and the common expectation of the people.”Footnote 5 Ultimately, our promotion of economic and social development is to achieve common prosperity for everyone. This important decision fully reflects China’s unique national leadership ability, namely the strong political will, firm political determination, scientific political decision, and Party-wide political consensus of the Party Central Committee with Comrade Xi Jinping at its core. The success of the strategic decision is the greatest success, which is the guarantee of the strategic decision to achieve common prosperity for everyone.

Second, the Party Central Committee has formulated a strategic goal and a road map for realizing common prosperity. Following the recommendations of the Fifth Plenary Session of the 19th CPC Central Committee, the country has formulated the 14th Five-Year Plan and the 2035 Vision. This is the country’s first action plan and roadmap to implement the sound promotion of common prosperity. On the road to promoting common prosperity for everyone, we must adhere to the CPC’s overall leadership, mobilize the whole of society, all the people, and all levels of government, and mobilize the whole nation’s efforts to do great things for all the people. This is the greatest guarantee of political mobilization to achieve common prosperity for everyone.

Third, the major decisions of the Party Central Committee have won a high degree of consensus and broad support from the whole society. When Deng Xiaoping proposed the first rich theory, it caused great controversy, but later proved to be a major innovation and an important way to break out of the “poverty trap.” When Jiang Zemin proposed the goal of “building a moderately prosperous society” at the 16th National Congress of the CPC, some people doubted whether this goal could be achieved because of the impact and influence of the Asian financial crisis, the difficult plight of state-owned enterprise reform, and the layoffs of tens of millions of workers in state-owned and collectively owned enterprises. When Hu Jintao set the goal of building a moderately prosperous society at the 18th National Congress of the CPC, the whole CPC and the whole society had “Three Confidence” (confidence in our chosen path, confidence in our theories, confidence in our political system).Footnote 6 At the 19th National Congress of the CPC, Xi formally proposed the third strategic vision of fundamentally realizing socialist modernization 15 years ahead of schedule by 2035, and also explicitly put forward the ambitious goal of taking a solid step toward the common prosperity for everyone, which won a high degree of consensus among the whole CPC and all ethnic groups and won unprecedented social support. This is the greatest social guarantee for realizing common prosperity for everyone.

4.2.2 Achieving Common Prosperity Under the Condition of Maintaining Medium and High Economic Growth

China already has the economic strength and economic conditions to achieve common prosperity and can achieve the four doubling goals by 2035.

First, economic strength must be brought to a new level to achieve the doubling of GDP. The basic economic condition for achieving common prosperity is to maintain medium and high economic growth. It is expected that in the coming period, China’s economic growth rate will be in the medium and high-speed (about 5%) growth stage (see Table 4.1), China’s economy has huge development potential, growth inertia, and growth momentum. It is expected that by 2035, China’s total GDP will double that of 2020, rising from 101.6 trillion yuan in 2020 to more than 210 trillion yuan at constant 2020 prices, reaching a cumulative total of more than 2250 trillion yuan.

Table 4.1 Forecasted average annual growth rate of key economic indicators in China (2021–2035) (Unit: %)
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In 2017, the international dollar is expected to rise from 23.01 trillion international dollars in 2020 to more than 48 trillion international dollars in 2035, increasing the proportion of world GDP to about 27% and maintaining the contribution rate to world GDP growth at more than 1/3, becoming a true world economic power. This is the most important economic foundation for our country to achieve common prosperity for everyone.

Second, to double the per capita GDP to reach the level of middle-developed countries. It is expected that in the coming period, China’s GDP per capita will still maintain medium–high growth, reaching more than 150,000 yuan in 2035 from 72,000 yuan in 2020 at 2020 RMB prices and reaching 33,500 yuan in 2035 from 16,100 international dollars at purchasing power parity 2017 international dollars, equivalent to more than 40% of the U.S. GDP per capita level, reaching the level of medium-developed countries. This is a solid economic foundation for our country to achieve common prosperity for everyone.

Third, to double the total labor productivity and narrow the relative gap with developed countries. It is expected that in the coming period, China’s total labor productivity will be slightly higher than the economic growth rate because the proportion of China’s employed population has been declining, especially the proportion of agricultural employment has been significantly reduced to less than 20%, which will have a structural optimization effect on the improvement of labor productivity. The continuous increase in the average years of education of the working-age population and the continuous increase in the per capita capital stock of the labor force will together contribute to a continuous increase in total labor productivity with an average annual growth rate of more than 5%. This is the production base for doubling the per capita income of the population.

Fourth, to double the growth of the per capita income of residents. It is expected that in the coming period, the per capita disposable income of China’s residents will grow at an average annual rate of more than 5%, rising from 32,200 yuan in 2020 to more than 65,000 yuan in 2035, equivalent to an increase from 21 international dollars per person per day to more than 42 international dollars per person per day in 2035, entering the international middle-income standard range (10–100 international dollars per person per day). This is the basic condition and international benchmark for achieving common prosperity for everyone.

The goal of doubling four key economic indicators by 2035 is both necessary and feasible. Historical experience is worth summarizing. In 2002, the Party Central Committee proposed the goal of quadrupling GDP by 2020 with an average annual growth rate of 7.2%, while the actual result was 5.28 times with an average annual growth rate of 8.7%. 2021–2035 can be considered as the bottom line with an economic growth rate of 4.8% to achieve the doubling of GDP and strive to reach 5% and above (see Table 4.1) so that China’s economic wheel can move steadily and far.

China has many favorable factors to maintain medium to high economic growth. First, China’s domestic savings rate is still significantly higher than the world average. In 2020, China’s domestic savings rate was 44.5%, higher than the world average (26.1%),Footnote 7 and the total domestic investment rate was 43.5%, also higher than the world average (25.6%), and the capital stock will continue to grow, which means that China’s economic growth rate will be at least twice that of the world economy.Footnote 8 Second, China’s labor force participation rate remains high. In 2020, China’s labor force participation rate was 75.9%, higher than the world average (66.5%),Footnote 9 of which the female labor force participation rate will be 68.6%, also significantly higher than the world average (52.6%).Footnote 10 Finally, the contribution rate of China’s scientific and technological progress continues to increase, which is also the most important factor in sustaining medium and high-speed growth. The contribution rate of China’s scientific and technological progress has increased from 55.3% in 2005 to over 60% in 2020. These advantages can be maintained in the future. As the total volume of China’s economy becomes larger and larger, economic growth is shifting from high speed to medium and high speed by the objective law. The driving force of economic growth relies more and more on factors such as scientific and technological innovation, improvement of human capital and labor productivity level, expansion of the domestic market size, and development of the world market.

4.2.3 Achieving Common Prosperity Under the Conditions of High Income

In the future, our country will achieve common prosperity for everyone at the level of high-income and middle-income countries, demonstrating the “a rising tide lifts all boats” effect and the scale effect of large countries.

First, China enters the stage of high-income countries (14th and 15th Five-Year Plan periods) and then reaches the level of moderately developed countries (16th Five-Year Plan period). The common prosperity for everyone in China is based on high income, the level of middle-developed countries, and the high level of human development, and will continue to leap to a new level from quantitative to qualitative changes. It should be noted that the size of our total population (1.41 billion people in 2020) has already surpassed that of the Organization for Economic Cooperation and Development (OECD) countries (1.37 billion people in 2020), setting a new record in the history of world modernization, which is unprecedented both in terms of the size of the mega-population and the scale effect of the market in large countries, as well as its impact on the world, making it a miracle after the creation of the two great miracles of building a moderately prosperous society in all aspects and eliminating absolute poverty. It has become the next miracle after the two miracles of building a moderately prosperous society and eliminating absolute poverty.

Second, the sources of income of our residents have become more diversified. In addition to the growth of wage income, the share of net business income, net property income, and net transfer income (both government and intra-household) have increased. Even the bottom 20% of the population (mainly the rural population, about 284 million people) with the lowest incomes still managed to more than double their per capita income, exceeding the international minimum or lower-middle-income standard (10–100 international dollars per person per day) and becoming a middle-income group.

Third, the size of the middle-income group is growing rapidly. Looking at the per capita disposable income of residents by quintile (see Table 4.2), by 2035, low-income households will reach 11.1 international dollars per person per day, lower-middle-income households will reach 22.6 international dollars, middle-income households will reach 35.8 international dollars, upper-middle-income households will reach 55.1 international dollars, and high-income households will exceed 100 international dollars. This means that almost all of China’s population is at the lowest level of international middle income according to the World Bank standard, i.e., the daily income per person is more than 10 international dollars, among which 40% of the population with daily income per person is more than 50 international dollars and 40% of the population with 20–50 international dollars, forming an “olive-shaped” income distribution pattern with two small ends and a large middle. The “olive” pattern of income distribution is formed. Therefore, it is crucial for the state and society (including enterprises and institutions) to ensure the continuous income growth of low-income households and strive for a higher-than-average growth rate of the per capita income of low-income households. For some low-income groups, direct financial transfer subsidies (“direct subsidies”) can be used as one of their income sources, so that the income growth rate of low-income households is higher than the local per capita growth rate and higher than the income growth rate of high-income households, thus reducing the Gini coefficient.

Table 4.2 Daily disposable income per inhabitant by quintile (2020–2035) (Unit: International Dollar/day)
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4.2.4 Building the Largest Intermediate Developed Urbanized Society in the World

In the future, China will build an urbanized society with the largest urban population in the world, more prosperous, more developed, and more diverse.

First, China is still in the process of rapid development of urbanization. By 2035, China will realize the construction of a new type of urbanization, and in 2020, China’s urban resident population was 902 million, accounting for 63.9% of the country’s total population and 20.7% of the world’s total urban population. It is expected that by 2025, the country’s urban resident population will reach more than 1 billion, accounting for more than 70% of the country’s total population, exceeding the average urbanization rate of middle and high-income countries (67.6% in 2020); reaching nearly 1.1 billion in 2035, accounting for 78% of the country’s total population, slightly lower than the 81% of OECD countries (2020 data).Footnote 11 China’s cities and towns are still the main places to absorb the rural transfer population, and deepening the reform of the household registration system plays an active role in promoting people-centered urbanization. By 2035, we aim to eliminate the difference between urban and rural household registration and the institutional dual structure between urban and rural areas.

Second, China’s rural population has been greatly reduced. The difficulty of common prosperity is concentrated in rural areas, and only by continuously reducing the rural population can we continuously make farmers rich. China’s rural population will decrease from 510 million people in 2020 to 320 million people in 2035, or about 190 million people, an average annual decrease of 12 million people, down from 16 million people in 2010–2020. This will help further narrow the relative income gap between urban and rural residents, and improve the level of national per capita transfer payments to rural residents and the capacity of basic public services. In the period ahead, China will make significant progress in integrating urban and rural infrastructure and continue to narrow the gap between urban and rural areas in education, health care, culture, and other social undertakings, all of which will greatly contribute to the convergence of human capital indicators such as life expectancy and average years of education of the working-age population between urban and rural areas, and continuously improve rural labor productivity and income levels. This is the basic way to make rural people rich (Table 4.3).

Table 4.3 Total population and urbanization rate in China (2010–2035)
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4.2.5 Continuing to Narrow the Gap Between Urban and Rural Per Capita Income and Consumer Expenditure

The income of China’s urban and rural residents will continue to rise, and the relative gap will continue to narrow. From 2020 to 2035, the per capita disposable income of urban residents is expected to rise from 43,800 yuan to 83,200 yuan, with an average annual growth rate of 4.4%, while the per capita disposable income of rural residents will grow at an average annual rate of 6.1%, and the relative gap between the per capita disposable income of urban and rural residents will The relative gap between the per capita disposable income of urban and rural residents will continue to narrow, from 2.56 times in 2020 to less than 2 times in 2035. Meanwhile, the relative gap between urban and rural residents will continue to narrow as the per capita consumption expenditure of urban and rural residents will continue to increase from RMB 27,000 to RMB 56,400 in 2020–2035, with an average annual growth rate of 5.0%, while the per capita consumption expenditure of rural residents will increase from RMB 13,700 to RMB 33,200, with an average annual growth rate of 6.1%. The relative gap between urban and rural residents per capita consumption expenditure will continue to narrow, from 1.97 times to less than 1.7 times.

The Engel coefficient of urban and rural households in China will continue to decline and converge. It is expected that by 2035, the Engel coefficient of urban and rural residents will decrease from 29.2% and 32.7% in 2020 to 19.6% and 21.8%, respectively (see Table 4.4), indicating that the actual consumption structure of urban and rural households in China will reach the level of middle-developed countries. It is worth noting that the increase in the consumption level of urban and rural residents may have side effects. At present, the rate of overweight and obesity among urban and rural residents of all ages in China continues to rise.Footnote 12

Table 4.4 Comparison of per capita indicators for urban and rural residents (2020–2035)
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The per capita living area of urban and rural residents in China will continue to increase. The per capita living area of urban residents will increase from 39.0 square meters in 2018 to more than 50 square meters in 2035, and the per capita living area of rural residents will increase from 47.3 square meters in 2018 to more than 55 square meters in 2035. The average number of cars owned by urban and rural residents per 100 households will double.Footnote 13 This indicates that the actual living standard and consumption structure of urban and rural residents in China will reach the level of middle-developed countries, which has become an important feature of basic modernization.

The country is experiencing an unprecedented miniaturization of the family household, with the average household size declining from 3.10 persons in 2010 to 2.62 persons in 2020.Footnote 14 It will continue to decline and maybe around 2.10 persons by 2035, i.e., a shift from “three-person households” to “two-person households” over 20 years. The number of one-person households is also on the rise, with the total number of households nationwide continuing to grow from 402 million in 2010 to 494 million in 2020 and then increasing by at least another 100 million by 2035. The main reason for the increase in the number of family households is the increase in the number of single-person households, which is largely influenced by aging and fewer children and is also related to the concept of marriage and non-marital childbearing.

4.2.6 Improving National Financial Strength and Distribution Capacity

China’s general public budget revenue is expected to more than double from 18 trillion yuan in 2020 to more than 36 trillion yuan in 2035.Footnote 15 Among them, the total transfer payments from the central government to local governments will increase from 10 trillion yuan to more than 20 trillion yuan, with the cumulative amount of both reaching 400 trillion yuan and 225 trillion yuan, respectively. This will become the basis of the national fiscal attracting capacity and transfer capacity for China to achieve common prosperity for everyone. National fiscal capacity and fiscal expenditure have a decisive influence on the adjustment of income disparity through redistributive means.

4.2.7 Building the Largest Universal Social Security System in the World

The number of people covered by China’s basic pension insurance has increased from 136 million in 2000 to 999 million in 2020; the number of people covered by unemployment insurance has increased from 104 to 217 million; and the number of people covered by work injury insurance has increased from 43.5 million to 267 million. The number of people participating in national basic health insurance will increase from 37.87 million to 1.361 billion,Footnote 16 with the participation rate stabilizing at over 95%, reaching or even exceeding the total population of OECD countries (1.360 billion people) and the participation rate (91.2% in the United States in 2017, of which the private health insurance participation rate is only 63.1%). By 2030, the entire population of China will achieve full coverage of all social security programs, which is a socialist system guarantee and social security advantage to achieve common prosperity for everyone.

4.2.8 Implementing Three Five-Year Plans Effectively

The effective implementation of the Five-Year Plan has become a strategic means to achieve common prosperity for everyone. The Outline of the Fourteenth Five-Year Plan for National Economic and Social Development of the People’s Republic of China and Vision 2035 (hereinafter referred to as the Outline) is the first five-year plan that firmly promotes common prosperity.Footnote 17 Among the six major development goals, two (“Achieving new results in economic development” and “Achieving new levels of people’s well-being”) are directly related to common prosperity. Ten of the 20 major quantitative indicators and five of the 20 minor quantitative indicators reflect the theme of solidly promoting common prosperity and serve as the basic basis for designing the overall goal and indicator system for achieving common prosperity in the new era, as well as important indicators for annual monitoring, mid-term evaluation, and post-term evaluation during the 14th Five-Year Plan period.

Through implementing the 14th Five-Year Plan, the 15th Five-Year Plan, and the 16th Five-Year Plan, China will spend 15 years gradually promoting the ambitious goal of common prosperity. During these three five-year planning periods, China will gradually improve the institutional mechanism for promoting common prosperity for everyone and make obvious and substantial progress.

In conclusion, after more than 70 years of socialist modernization, especially since the reform and opening up, China’s economic strength, scientific and technological strength, national defense strength, and comprehensive national power have stepped up to a new level, and have entered the forefront of the world, with the political, economic, social, cultural, and the ecological conditions to achieve common prosperity. We are more confident and capable of achieving the great goal of common prosperity for everyone than at any other time in history.

4.3 Critical Challenges to Achieving Common Prosperity

China has achieved the twin miracles of rapid economic growth, long-term social stability, and the elimination of absolute poverty, and will continue to achieve common prosperity for its people. In the process, China will face many unfavorable constraints and major challenges, which are naturally related to China’s national characteristics. First, China will always be the most populous country, and even if the total population of India exceeds that of China in the future, the total population of China will still be over 1.4 billion. Second, China is a vast country with great geographical differences, and uneven development of different regions is rare in the world. Finally, the gap between urban and rural areas in China is so wide that it exceeds that of the world’s major high-income countries, and it is a long-term development task to narrow the income gap and equalize basic public services. As we can see, there is no precedent for achieving common prosperity for everyone, and China needs to explore the path of achieving common prosperity according to its national conditions.

Achieving common prosperity is also an inevitable condition for alleviating or solving the main contradiction of our society. At present and for a considerable period in the future, the main contradiction in our society has turned into the contradiction between people’s growing demand for a better life and unbalanced and insufficient development, which is the most fundamental national condition of our country and is highlighted as a major challenge in five aspects.

4.3.1 More Than Tens of Millions of People in Need

Ensuring that the incomes of the 70 million rural poor who have been lifted out of poverty in China can continue to grow at a relatively fast pace is an ongoing task and an important foundation for promoting common prosperity. By 2035, China will ensure that the per capita income level of the rural population that has been lifted out of poverty will more than double again, including raising transfer payments such as government financial subsidies, social security, public services, etc. to a new level. In addition, China has several special hardship groups, such as urban areas with about 5.5% of the surveyed unemployed population (more than 25 million people). With the comprehensive victory in poverty alleviation, more than 7 million poor people with disabilities who have been issued a record card have been lifted out of poverty on schedule, 9.634 million people with disabilities have been included in the minimum living security, and nearly 3 million poor people with severe disabilities have been individually insured.Footnote 18 According to the data released by the Ministry of Civil Affairs, there are still more than 57 million low-income people in China, accounting for 4.0% of the country’s total population, and a dynamic monitoring information system should be established for such people. Therefore, no matter what level of development China has reached, there will always be about 5% of the population (about 70 million people) who belong to the key needy groups, and this group will become the key target group for the state and the whole society to help and support. The political advantage of the leadership of the Communist Party of China, the institutional advantage of the socialist society, the advantage of the state’s financial redistribution ability, and the advantage of social donations and assistance should be transformed into the unique national advantage of great socialist common prosperity, and more than 90% of the population should be mobilized and utilized to help and assist the 5% of the population in key difficulties.

4.3.2 Severe Lack of National Redistribution Capacity

The national fiscal capacity has been declining, and the redistribution capacity is seriously insufficient. After the reform of the “tax sharing system,” the ratio of the national general public budget revenue to GDP has gone through a process of “first rising, then falling,” first from 10.7% in 1994, when the tax sharing system was reformed, to 22.1% in 2015, and then to 18.0% in 2020, which is still lower than 19.0% in 2007 despite a decrease of 6.1 percentage points. It then fell to 18.0% in 2020, a decrease of 6.1 percentage points, but still less than the 19.0% in 2007. Meanwhile, the ratio of general government expenditure to GDP decreased from 25.5% in 2015 (the peak) to 24.2% in 2020, also a decrease of 1.3 percentage points, and the difference between general government expenditure and revenue as a ratio of GDP increases from 3.4 percentage points to 6.2 percentage points, a typical overdraft type of government finance (over 3%) that was the highest in China, as well as the highest since the reform and opening up, becoming even more unsustainable.Footnote 19 An important reason for the widening fiscal gap since 2015 was the supersized tax cuts. According to data released by the Ministry of Finance, from 2016 to 2020, the national macro tax burden decreased from 17.47% to 15.2%, and the total export tax rebate increased from 1.17 trillion yuan to 1.45 trillion yuan, corresponding to a decrease in the share of total exports from 8.5% to 8.1%. The new tax cuts and fee reductions totaled more than 7.6 trillion yuan,Footnote 20 corresponding to the share of GDP in the same period. This directly subsidizes exporters and indirectly subsidizes foreign importers and consumers, and although it helped achieve the short-term goal of “maintaining employment and exports,” it also causes a significant and continuous decline in the long-term national fiscal appeal and redistributive capacity. In addition, the level of development of the country’s third distribution capacity is grossly inadequate, with public charities receiving only about 0.15% of GDP in cash and goods.Footnote 21

At present, the polarization of rich and poor is not only a global challenge and problem but also the biggest development challenge facing China. As Xi said, “At present, the global income inequality problem is prominent, some countries are divided between the rich and poor, the middle class collapsed, leading to social tearing, political polarization, populism proliferation, the lesson is very profound! Our country must resolutely prevent polarization, promote common prosperity, and achieve social harmony and stability.”Footnote 22 This fully reflects the political will and development goals of the CPC and the government and is the distinctive feature and development direction of the new era of socialism with Chinese characteristics.

The next decade or so will still be an important strategic opportunity period for China, which must be grasped firmly and explored fully, and promoting the building of a common prosperity society is the core task and development goal. China already has many favorable conditions and development advantages for making solid progress toward common prosperity and has won the support of the whole nation, but at the same time, it faces many development challenges and problems that need to be solved, among which the serious lack of national financial resources and redistribution is the biggest challenge. But the opportunities outweigh the challenges, and there are always more solutions than difficulties. In a world power with more than 1.4 billion people and nearly 500 million households, it is rare, and thus more remarkable in the world, that we can achieve common prosperity for everyone. China already has growing economic strength, scientific and technological strength, comprehensive national power, increasingly obvious political advantages, institutional advantages, and policy advantages. These advantages will be able to ensure that we achieve the ambitious goal of common prosperity for everyone in 2035.