Wang Yiming: Olive growers

By Chinadaily    Updated: 2021-10-29

Wang Yiming Vice Chairman and Deputy Director of the Executive Board of CCIEE

More must be done to facilitate the upward mobility of those in the low-income group to promote common prosperity amid high-quality development 

When the People's Republic of China was founded in 1949, it was a poor and backward country. At the end of 2020, China announced it had eliminated absolute poverty and is now gearing up to achieve common prosperity. For that it needs to not only grow at a rate that is higher than in the developed countries but also ensure a high quality of progress. The key is to improve total factor productivity-the ratio of aggregate output, or GDP, to aggregate input-in which China still lags behind the developed countries.

Realizing common prosperity, a long-term historical process which has its share of complexities and difficulties, calls for unremitting efforts and patience. China has grown to become the second-largest economy, but still remains a developing country. In 2020, its per capita GDP was about $10,400, far behind that of developed countries.

On Aug 17, while addressing the 10th meeting of the Central Committee for Financial and Economic Affairs, President Xi Jinping called for adhering to a people-centered development philosophy and promoting common prosperity while pursuing high-quality development.

As a prerequisite for achieving common prosperity, China has shifted the focus from setting quantitative economic indicators to pursuing high-quality and more sustainable development that is more environmentally friendly, more people-centered and more innovative. Its ultimate goal is to meet people's aspirations for a better life, and their demands for all-around progress, which is in line with the goal of common prosperity.

High-quality development refers to an efficient production system and a more inclusive distribution system. That includes a perfected initial distribution system as well as improved redistribution mechanisms to standardize the order of income distribution and gradually expand the size of the middle-income group. Expanding the middle-income group is the essential means of realizing common prosperity.

At the beginning of the reform and opening-up, the Chinese government encouraged some people to get wealthy first.

Since the 18th National Congress of the Communist Party of China in 2012, poverty alleviation was accorded priority, and the task has been accomplished as China has built a moderately prosperous society in all respects.

As China has now embarked on a new journey to build a modern socialist country in an all-around way, the focus should shift toward getting more people into the middle-income group and gradually fulfilling the target of moderate affluence for everyone.

Going by income distribution in China, nearly 80 percent of the population is near the lower limit of the middle-income standard. The government should create a favorable institutional environment so that those in the low-income group can enter the middle-income group through their efforts. As a result, the country will form an olive-shaped income distribution structure and cement its intrinsically driven economic growth capability.

According to the National Bureau of Statistics, China has 400 million middle-income earners. If their population were to double in 15 years, the proportion would rise to nearly 60 percent of the population, basically attaining the desired olive-shaped social structure.

When the middle-income population reaches 800 million it will also exceed the total combined population of the United States and the European Union combined. Those in the middle-income group usually have professional or technical jobs after a period of higher education and their stable incomes give them a strong consumption capability, which can enhance the country's human capital accumulation, lift the quality of people's lives and economic development.

To enlarge the middle-income group, the Chinese government should focus on key groups and adopt measures targeted at prominent problems.

The primary focus should be on bringing the incomes of the low-income group close to the threshold of the middle-income group. The low-income group consists of industrial workers, people who have moved to the cities from rural areas, and farmers, especially those around cities.

Providing them with training in vocational skills can help them enter the middle-income group.

The migrant population from the countryside needs more equal public services to solve the difficulties in their lives and increase their consumption capacity. Studies show that once their economic condition improves, their consumption level will increase.

The government can also help farmers raise property income by accelerating the rural land system reform.

It is necessary to improve human capital. An analysis of household surveys shows that better human capital conditions such as a higher level of education play a crucial role in raising income and expanding the size of the middle-income group.

Institutional barriers to social mobility also need to be removed to swell the size of the middle-income olive.

In recent years, there has been increased labor flowing between regions because of increased convenience and support. However, upward social mobility, meaning an improvement in social status, remains a challenge for various reasons such as the existing structure of vested interests. So, it is crucial to create more equitable opportunities for low-income people to join the middle-income group.