Lin Xi hauls buckets of water up 22 flights of stairs everyday. In her bare apartment in Linyi of Shandong — about 350 miles north of Shanghai — she cooks simple meals on a gas stove on the floor, keeps the light on with a solar generator, and puts up a tent as a makeshift bed for her daughters.

Lin has worked on factory assembly lines since she was 14. A single mother of two, she spent the bulk of her savings on a down payment for an apartment in 2021, hoping to give her daughters a home. But construction on the apartment has stalled as the developer, Country Garden, ran out of funds amid China’s clampdown on excessive borrowing in the property sector. 

With no other option, she recently moved into the “rotting home,” which has neither electricity nor running water, as many other homeowners in similar situations have done across the country. 

“I feel lost and hopeless,” says Lin, who worries about how to keep her kids warm over winter when the temperature drops. “I don’t know what to do.”

A rural migrant worker 310 miles away, in Zhengzhou of Henan, says he knows the feeling. Speaking over the messaging platform QQ, the man, who gave his surname as Huang, says he works nearly 14 hours a day as a ride-hailing driver, putting two kids through school and supporting his elderly parents back in the countryside. As business dwindles, his earnings have fallen from 5,000 yuan ($707) a month in 2021 to little more than 3,000 yuan ($425) a month. Meanwhile, his parents’ monthly pension of 120 yuan ($17) is barely enough to cover their daily expenses. Struggling to make ends meet, Huang has stopped paying his own basic medical insurance premium of 400 yuan ($57) per year. 

“What we want is basic social protection and a fair environment,” he says, “where our kids will have a fighting chance.”

Both Lin and Huang say it wasn’t supposed to be like this. 

The economy is in such a bad shape that common prosperity is no longer a high priority. There is no prosperity, what is there to be common now?

Minxin Pei, a professor of government at Claremont McKenna College

In 2021, after four decades of exponential economic growth in China’s economy, Chinese leader Xi Jinping revived the party slogan “common prosperity” in order to address the country’s glaring inequality. Having declared “victory” in China’s fight against absolute poverty earlier that year, Xi seemed confident he could once again massage China’s economy to more equitably spread out the country’s amazing wealth. “Achieving common prosperity is not just an economic issue, but a major political matter with bearing on the party’s governing foundation,” Xi told officials in early 2021. “We cannot let an unbridgeable gulf appear between the rich and the poor.”

Common prosperity promptly soared up the party’s agenda. 

“You couldn’t open the newspaper and watch the news without hearing about common prosperity. It was in the media, in the political discourse, in Xi Jinping’s speeches, and in school curriculum,” says Lizzi Lee, a fellow on Chinese economy at the Asia Society Policy Institute’s Center for China Analysis. “The idea was the extent of wealth disparity has gotten out of control; now we have to walk it back and redistribute wealth more equitably.”

The income distribution, officials said, should resemble an olive, with two small ends and a large middle. So Xi, who many experts say has an outsized role in economic decisions, started pushing at the ends in order to plump up the middle. 

On the one end, he said low income groups should be given a leg up so they could join the middle class. He pointed to villages like Lizu, on the outskirts of the manufacturing hub of Yiwu in eastern China, as proof change could happen. 

Over the past two decades, Lizu has undergone a makeover as local authorities cleaned up the village pond, paved news roads, and turned deserted houses into studios for creators. It is now home to a hipster cafe, pottery studios, and tie dye workshops, and draws tens of thousands visitors per year. When he visited last September, Xi Jinping held up the village as a model for common prosperity and was reportedly “delighted” to learn that Lizu village’s 700 residents have seen their per capita income rise to 52,000 yuan ($7,368) — more than double that of rural residents in China and on par with their urban counterparts. In January, the province’s information office posted a video, showing officials handing out stacks of cash to some 30 households as dividends for their shares in a collective farmstay.

“I am very happy,” one villager said, smiling from ear to ear. “Life is getting better and better.” 

On the other end of the olive, Xi didn’t so much push for change as he lobbed off the top. By the end of 2021, a sweeping crackdown hit elites and sectors deemed to have accumulated more than their fair share of wealth — or “disorderly expansion of capital,” as officials like to put it. Entire industries from education and technology to real estate and finance were overhauled, sending tremors through the private sector that linger still today. 

China’s titans of industry were broken up, fined, and exhorted to make charity donations, launching a kind of common prosperity loyalty competition. Tencent pledged 100 billion yuan ($15.5 billion), half of which went to a common prosperity fund to improve the lives of low-income earners. Alibaba offered the same amount to support small businesses, gig workers and agricultural industrialization. Pinduoduo, the e-commerce firm, gave away its quarterly profits of $372 million in 2021 as part of a 10 billion yuan pledge ($1.5 billion). 

But for all the sloganeering and eye-popping handouts, experts say “common prosperity” had little substance behind it. Implementing the directive was often left to local authorities, such as provincial or ministry officials, who had trouble following through with the vague, loosely-defined policy goal. 

For regular workers like Huang, who says he followed the headlines closely, the needle barely moved. “No matter how many corrupt officials they catch, it doesn’t seem to do anything to improve the lives of people at the bottom of society like us,” he says. 

Indeed, a growing share of Chinese citizens agree with Huang. In a recent nationwide survey conducted by Stanford University, respondents for the first time in 20 years attributed wealth or poverty to structural factors — such as an unfair economic system and unequal opportunities — rather than individual merits, such as lack of ability and effort. Across all income groups, far more reported that their family’s economic situation had deteriorated over the past five years, and those in the low-income bracket, such as Huang and Lin, reported being the least optimistic about the prospects for social mobility. 

While there have been many other surveys on the confidence of investors, businessmen and consumers in urban households, “this paper is the first that went out and asked the lao baixing, the ordinary people out there, what they think,” says Scott Rozelle, co-director of the Stanford Center on China’s Economy and Institutions, and one of the paper’s authors. “And it shows this rise of pessimism.”

What you see are these extreme campaigns [like common prosperity], which are very common in Chinese policies, that cause a big uproar, a lot of fear and maybe even panic, but don’t address the fundamental problem.

Mary Gallagher, dean of the Keough School of Global Affairs at the University of Notre Dame

This pessimism is reflected even in the Chinese leadership’s discourse, which has all but abandoned common prosperity as a slogan. The number of news headlines featuring the term “common prosperity” fell from its peak of over 1,000 in 2021 to a quarter of that this year, according to data on China National Knowledge Infrastructure, an online database for Chinese publications. The most telling sign of the shift was in the late Premier Li Keqiang’s government work report in 2022; common prosperity was mentioned only once, compared to the year before when it was a centerpiece. 

“The economy is in such a bad shape that common prosperity is no longer a high priority,” says Minxin Pei, a professor of government at Claremont McKenna College. “There is no prosperity, what is there to be common now?”

“What you see are these extreme campaigns [like common prosperity], which are very common in Chinese policies, that cause a big uproar, a lot of fear and maybe even panic, but don’t address the fundamental problem,” adds Mary Gallagher, dean of the Keough School of Global Affairs at the University of Notre Dame.

Just last week, the Chinese government unleashed a stimulus package — from cutting interest rates to lowering banks’ reserve requirement ratio — in an attempt to put a floor under the economy. But while the emergency actions triggered a market frenzy and may help the country meet this year’s growth target of 5 percent, the question remains of how to address the yawning income and wealth inequality in the world’s largest socialist country. 

“There’s no coherent economic program to improve the material prosperity of a billion and a half Chinese people,” says George Magnus, a research associate at Oxford University’s China Center. “Unlike the Western interpretation of redistribution, common prosperity is mainly a political project. And it has stark economic implications about how China is governed.”

‘LET SOME GET RICH FIRST’

The common prosperity slogan first emerged under the leadership of chairman Mao Zedong, whose vision was one of collective ownership. An article in the People’s Daily in 1953, headlined “The Path of Socialism is the Path to Common Prosperity,” argued that for peasants to thrive, they must unite and hold all resources, such as farm equipment and tools, in common. 

Mao’s economic policies ended in a famine that killed millions, but his successor, Deng Xiaoping, kept the slogan and turned it on its head. 

“The political terminologies of the Chinese Communist Party often work like bottles that can be emptied out of their contents and then refilled,” says David Bandurski, director of China Media Project, which studies the party’s political discourse. “Even if the political priorities change, the terms can be transformed or can resurface, suggesting continuity with the past.” 

For Deng, the priority was to open up China’s economy. Common prosperity remained a goal for the party, but Deng proposed a “shortcut” — “letting some people and regions get rich first,” with the expectation that the wealth would eventually trickle down. His strategy set the tone for the reform era in the next few decades, where the country pursued growth at all costs. “It is inherently a message to allow some inequality,” notes Wang Feng, a professor in sociology at the University of California, Irvine. 

But the second half of Deng’s plan didn’t quite play out as he had thought. Rural migrant workers, who moved from agriculture to sectors like construction, manufacturing and the services industry, propelled China’s rise, but they were largely shut out of education, social welfare, healthcare and other opportunities available to urban residents because of their rural hukou under the household registration system. 

More critically, while Chinese urban households have been able to multiply their wealth by riding the country’s booming property market, rural workers didn’t reap the same dividends. People without a local hukou were not allowed to buy properties in cities, a restriction that was only gradually relaxed in recent years. 

“It’s really your status that determines the wealth accumulation, and the majority of migrants were excluded from this process,” Wang says. “That’s what I call the two paths to prosperity: Migrants rely on their hard labor and wages, while the urban population enjoys a special privilege based on this social institution in China.”

In 2011, more than 128 million Chinese people, just less than 10 percent of the population, were living on less than a dollar a day. The following year, when Xi Jinping came to power, he set the objective of building a “moderately prosperous society.” In 2021, he celebrated the completion of that centenary goal, pointing to a series of metrics: the country’s GDP, which was double that of 2010, its 400-million strong middle class, and the number of residents living under the poverty line, which the government claimed has fallen from 98.99 million in 2012 to zero. 

“We have brought about a historic resolution to the problem of absolute poverty in China,” Xi said. 

Yet the issue of inequality in China remained. In May 2020, at a press conference following the top legislature’s annual meeting, the late Chinese premier Li Keqiang made a rare admission about the country’s fight against poverty, noting that while average disposable income reached 30,000 yuan, some 600 million people were living on less than 1,000 yuan ($142) a month. “It’s not even enough to rent a room in a medium Chinese city,” he said. 

That statistic took many Chinese people by surprise, stirring a debate about whether China was as prosperous as they had imagined, or if the poor had simply been pushed out of sight. 

“Many are still living on or near the bread line,” Wan Haiyuan, deputy dean of the China Institute for Income Distribution at Beijing Normal University, wrote in the business outlet, Caixin. “[They] have few channels to make their voices heard. In that sense, they are society’s silent majority.” 

At this point, after nearly a decade of power and the Covid-19 pandemic’s rattling of the global economy, Xi Jinping needed to shore up domestic support. He kickstarted the campaign for common prosperity with a speech in August 2021 citing his desire to avoid the societal problems that inequality causes in other countries. “In some countries, the wealth gap and middle-class collapse have aggravated social divisions, political polarization and populism, giving a profound lesson to the world,” Xi said. “China must make resolute efforts to prevent polarization, advance common prosperity and realize social harmony and stability.”

Some experts say Xi’s decision to seize on the slogan may have been inspired by his rival, Bo Xilai, a princeling once thought of as a contender for top political office. Before a series of political scandals led to his downfall in 2012, Bo was famous for establishing the Chongqing model in the southwestern city that he governed. He provided subsidized housing for low income groups and taxed private home ownership under the banner of common prosperity — efforts that gained him a reputation as a champion of the people. 

“It was clear from the Chongqing model that the politics of common prosperity, or the strategy of coming up with an anti-capital stance, is really politically useful to the government,” says Yueran Zhang, a political sociologist at the University of Chicago. “It works really well to mobilize the masses and secure a stronger base of mass support.”

“It’s a common term,” Gallagher, of the University of Notre Dame, adds. “Lots of leaders have used it, but I think Bo Xilai really elevated it, and Xi took that on for the whole country.”

But while Bo Xilai’s version of common prosperity included difficult economic reforms, Xi’s version was more akin to a political project. In fact, he resorted to the same measures used during the Mao era — by going after the rich, including the tech companies that he viewed as having too much power. 

“Under the guise of helping the common man, the party in Beijing basically brought the tech sector to heel,” says Andrew Collier, managing director of Orient Capital Research and senior fellow at the Mossavar-Rahmani Center at the Harvard Kennedy School. 

Similar dynamics played out in the banking and financial services industry, which is among sectors hardest hit by the campaign. Heads continue to roll amid a never-ending campaign to root out corruption in the industry. China’s graft buster also took aim at financiers’ “hedonistic” lifestyle, after which leading state-owned financial firms capped salaries at $3 million yuan (around $410,000) and clawed back bonuses. 

“[Common prosperity] fits very closely with Xi’s bigger political project, which is to centralize political control of all the spaces that opened up under Deng,” Magnus says. 

CROSSROADS

China is still aware of the need to make structural reforms, but progress has been painfully slow. The Third Plenum in July outlined the country’s economic course for the next five years but offered precious few details on implementation. Among the goals were an overhaul of the fiscal and taxation system that will give cash-strapped local governments more tax revenues, and promotion of rural-urban integration, such as relaxing the hukou system so more people can access basic public services where they reside. 

With a growth forecast of only 4.7 percent this year, however, some say the country has missed its chance. 

“What is really most tragic is that these reforms should have been done when China was growing most rapidly in the 2000s or 2010s,” says Gallagher. “It is much, much harder to do redistributive reforms when everyone’s sense is that the pie is shrinking.”

Indeed, the idea of tax reform remains deeply unpopular. A property tax, which could generate revenues to improve China’s social welfare system, was even floated in the early days of the common prosperity campaign, but it was soon shelved in the face of pushback.  

China’s fiscal system is not exactly regressive. As a recent World Bank paper noted, when taking into account in-kind education, health and social security benefits, the country’s overall fiscal policy achieves a level of inequality reduction that is around the median for upper middle income countries, similar to Brazil. 

But there is room to do significantly more. Personal income tax accounted for only 8.2 percent of the country’s total tax revenues in 2023, compared to 21 percent for OECD countries. 

“The fiscal system could make a greater dent in inequality by collecting more from those who could afford to pay more and leaving more money in the pockets of those who need it the most,” the authors wrote in the paper. 

Yet the party seems reluctant to rock the boat. “Any reform of the taxation system needs to take into account the psychological endurance of the people,” Han Zhu, a researcher at the China Institute of Fudan University, said in an interview in 2021. “A slight misstep can easily cause social unrest.”

There is still a very strong segment of the Chinese population, who believes that even though their personal wellbeing isn’t improving, China’s power and status as a nation state has increased a great deal.

Yueran Zhang, a political sociologist at the University of Chicago

More crucially, Xi Jinping is convinced that cash handouts and social assistance may encourage people to “lie flat.” He has pointed to other regions, such as Latin America, as examples where welfare breeds “lazy people.” “Once welfare benefits go up, they cannot come down. It is unsustainable to pursue welfarism,” he warned in late 2021, a stance that he has repeated multiple times.

Logan Wright, director of China markets research and a partner at Rhodium Group, notes that not reforming the tax system is a big risk, especially if China does nothing else to support increasing incomes. Economists have long argued that China needs to rebalance from a growth model led by exports and investments to a more sustainable one driven by consumption. Household consumption’s share of GDP has remained stubbornly low in China, sliding down to 39 percent after consumer confidence collapsed during the pandemic lockdown in 2022. 

“The key obstacle to consumption-led growth at this point is the fiscal system,” he says. “You have to somehow figure out how to transfer income to households one way or the other. There is really no other alternative.” 

China’s economic pivot to high-tech manufacturing, Wright adds, won’t help. To address long term challenges, such as China’s shrinking labor force and aging population, the country has gone all in on innovations such as AI, humanoid robots and automation. The high-tech sector’s share of GDP has increased from 11 percent in 2017 to 14 percent last year, and is estimated to reach 19 percent by 2026. The focus on industrial strategy will create national champions and very successful companies in EVs, AI and batteries, but it will do little to help China’s macro economy and its 500 million low-skilled workers.

China has the lowest level of education of all the upper middle income countries in the world; 70 percent of its workforce does not have a high school education. As jobs in construction and low-end manufacturing disappear due to offshoring, automation and shifts in China’s labor market, many workers have been pushed into the more precarious informal sector, becoming delivery drivers and street vendors. 

“If this development pattern — still investment-led, but increasingly capital intensive, rather than labor intensive — continues, it raises the risk that the decline in income and the weakness in employment becomes a more structural problem,” Wright says.

In his book, Invisible China, Rozelle predicted a polarization of the workforce where 200 million people may be rendered structurally unemployable. 

“If they aren’t getting jobs as China pushes towards high income, they’re going to be part of that pull down,” he says, warning that China risks falling into the middle income trap, where its GDP per capita stagnates. “This over-investment into high tech is taking away from this investment into the fundamentals [like human capital] that will let the economy grow for years and years and years.”

There will also be social and political consequences. 

“More and more Chinese people — the middle and low income class, the poor urbanites, the migrant workers — are feeling that they are left out, and that dissatisfaction will manifest itself in other ways that are potentially dangerous for the party to maintain social stability,” Lee says.

China Dissent Monitor, run by the Washington-based nonprofit Freedom House, recorded 805 dissent events in the second quarter of the year, representing a 18 percent year-on-year increase. In the past two years, it also logged 2,800 protests related to the property sector, including homeowners and construction workers seeking remedy.

“China is at a crossroads,” says Zhang, of the University of Chicago. “There is still a very strong segment of the Chinese population who believes that even though their personal wellbeing isn’t improving, China’s power and status as a nation state has increased a great deal.” 

But as the economic malaise drags on, he adds, the illusion of a rising country will be harder to keep up.

Huang, the rural migrant, finds himself wrestling with this contradiction today. A high school dropout, he spent years at a factory run by Foxconn, the Taiwanese electronics manufacturer and Apple supplier. He worked his way up to become a xianzhang, or a line leader, overseeing 150 workers in an assembly line. But the stable life crumbled in 2021, when his father, a former mine worker, was hospitalized over a lung disease. 

He says Foxconn would not allow him to take leave for more than two days, so he quit his job and returned home to care for his mother, who has dementia, and his father, until he could stand on his feet. He has been a ride-hailing driver since, but he fears it is not a job that will last for long. There are more drivers fighting over fewer customers, he says, and self-driving cars are being introduced, threatening to replace them all. Just this month, several platforms slashed the fees of drivers as local governments warned of saturation. 

A return to factories is also out of the question for him; now 45, he is considered too old and too slow. 

Yet still, he says he considers himself lucky compared to others he knows with even fewer prospects. “Such are the government policies,” he says. “What can us ordinary people do?”

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