The Institutional Framework of Common Prosperity in the Process of Chinese Modernization

Yang Yang

Sichuan University

Abstract: The report to the 20th CPC National Congress makes it clear that achieving common prosperity for all is an essential requirement of Chinese modernization,and that China has come to a historical period when concrete measures can be taken to promote common prosperity with a well-researched and effective system.In the new journey of Chinese modernization,we must correctly understand productive forces and production relations,properly handle the relation between efficiency and fairness,and promote common prosperity with sound systems.Therefore,efforts must be made to create an institutional framework of common prosperity that involves three pillars—socialism with Chinese characteristics as the fundamental system,improving the efficiency and vitality of productive forces as the basic system,and preserving fairness and adjusting productive relations and income distribution as the foundational system.To succeed,we must do the following three things.First,we should uphold the system where the Party leads the country,and all our work and the people run the country.Second,we should improve the basic economic system in which public ownership is the mainstay,the high-level socialist market economy,related systems,to promote high-quality economic development,and auxiliary systems to realize common prosperity with the digital economy.Third,we should perfect the institutional arrangements related to primary,secondary,and tertiary income distribution.

Keywords: Chinese modernization,common prosperity,system,productive forces,productive relations

The objective of achieving common prosperity for all has been given ever more importance since the 18th CPC National Congress.At the tenth meeting of the Central Commission for Financial and Economic Affairs (CCFEA) in 2021,President Xi Jinping,also general secretary of the CPC Central Committee,mentioned for the first time that common prosperity is an essential requirement of socialism and a key feature of Chinese modernization(People’s Daily,2021).The report to the 20th CPC National Congress specifies that “Chinese modernization is the modernization of common prosperity for all” (Xi,2022,p.22) and “the essential requirements of Chinese modernization include achieving common prosperity for all” (Xi,2022,p.23).Now,we have come to a historical period when all Chinese are marching steadily toward the objective of common prosperity (People’s Daily,2021).In this period,establishing an institutional framework for common prosperity was an important guarantee for achieving that goal in the new era and the new journey,and also a vital task in the course of realizing Chinese modernization.

Theoretically,balancing efficiency with fairness is a precondition for achieving common prosperity for all,and establishing and improving a sound institutional framework is an important guarantee for initiating such balance.Common prosperity consists of two aspects—material abundance and cultural confidence and self-reliance.This paper plans to envision an institutional framework from the perspective of productive forces and productive relations with comprehensive considerations of its actual needs and operability.Therefore,the common prosperity framework herein focuses on the material aspect.

“Prosperity” means the possession of a wealth,which reflects a fairly high level of productive forces in general—the result of social requirements for high-speed and highefficiency economic development.“Common” refers to how wealth is possessed,which reflects balanced,productive relations—a social requirement for fairness and justice.Clearly,both efficiency and fairness are indispensable in common prosperity.Ensuring and balancing the two through a sound institutional framework is a vital task on our way to common prosperity.

Compared with other countries,China has made the fastest progress on common prosperity in the past few decades,and its economic system that accommodates both efficiency and fairness has been constantly adapted to the time.With socialism as its fundamental political system,China has a solid institutional foundation for achieving common prosperity for all(Ou,2022).On that basis,it can,through institutional inclination and innovation in top-level design,enable people to,with equal opportunities,engage in high-quality economic and social development to the largest extent (Yu,2021).

Therefore,we must achieve the goal of common prosperity for all in the course of Chinese modernization,not only creating wealth through hard work but also dividing and distributing the wealth appropriately through institutional arrangements.To begin with,we need to“enlarge the pie” through high-quality development.Only by doing that will we have the pie to divide and distribute in the first place.Then,we need to propel and motivate the people to keep “enlarging the pie” by “sharing the pie well.” The first step is to improve the productive forces of the whole society,while the second is to reflect fair and just social relations.The essence of socialism lies in,first and foremost,emancipating and developing productive forces,and secondly,the scientific distribution of wealth (Zhou &Tang,2022).We must place equal emphasis on both to advance common prosperity for all,which is the essential requirement of socialism.Establishing and improving the systems that enable us to “enlarge the pie”and “share the pie well” is a vital step to ensure fairness and efficiency simultaneously and the fundamental guarantee for pushing forward our common prosperity cause soundly and rationally.

Firm Foundation: The Socialist System is the Fundamental Guarantee for Common Prosperity for All

Xi Jinping,general secretary of the Communist Party of China (CPC) Central Committee,has on many public occasions,stressed that common prosperity for all is the essential requirement of socialism and a key feature of Chinese modernization.This statement,with profound connotations,summarized and extracted by the CPC Central Committee through long years of practice,accurately describes the relationship between common prosperity and socialism (Sun &Bai,2022).Therefore,what’s most important now is to clarify what common prosperity in a socialist society means as we work to improve the institutional framework for common prosperity.

Common Prosperity for All is the Essential Requirement of Socialism

The Communist Manifestosays socialism is bound to replace capitalism.In hisEconomic Manuscripts of 1857–1858,Marx envisioned a society where social productivity would develop so rapidly…that the purpose of production would be the prosperity of all(People’s Publishing House,2009,p.200).Highly developed productive forces are the precondition and material foundation for common prosperity.On that basis,Deng Xiaoping further summarized the essence of socialism: “liberation and development of productive forces,elimination of exploitation and polarization,and the ultimate achievement of prosperity for all.” (Beijing: People’s Publishing House,1993,p.373) This demonstrates that common prosperity encompasses both productive forces and productive relations,which are both indispensable and interrelated.It also shows that both are integral elements of the essence of socialism.“The aim of socialism is to make all our people prosperous,not to create polarization” (People’s Publishing House,1993,p.110–111).Therefore,socialism must develop productive forces,adjust social relations in parallel,and ensure the abundance of material wealth and the sharing of productive means and development outcomes (Zhou&He,2022).

Socialist Common Prosperity is Essentially a Political Matter

On the surface,advancing common prosperity seems to be an economic and social matter,but it is actually a political matter (Luo &Wu,2022).For one thing,political activities are an essential part of common prosperity for all,which,while reflecting the economic affluence of the people,also reflects—and more importantly so—the elevation of their political awareness and integrity.For another,how to distribute social wealth and share the fruits of labor is a vital political issue on our way toward common prosperity.Highly developed productive forces and significant social wealth are preconditions for achieving common prosperity.This is a major economic issue.However,how to coordinate and distribute social wealth and achievements in a fair and just manner is a significant political issue,a critical one for achieving common prosperity that must comply with the nature of socialism.

The Party’s Leadership is the Fundamental Guarantee for Achieving Common Prosperity

The leadership of the Communist Party of China is the greatest strength of the system of socialism with Chinese characteristics.It decides the features,directions,and strengths of all other systems and provides the fundamental guarantee for solidly pushing for common prosperity in China.The Party always takes satisfying the people’s aspirations for a better life as the goal of all its work and has served as the pillar and core in leading the people on the new journey to realize common prosperity for all.The Party,in its leading role,has established a series of policies and guidelines and made strategic deployments for the cause of promoting common prosperity in the process of realizing Chinese modernization,including tasks,timetables,and a roadmap.History has proven that only by upholding the Party’s leadership and exerting the strengths of its centralized and unified leadership will it be possible to advance steadily and eventually realize common prosperity for all.

People Running the Country is the Political Guarantee for Socialist Common Prosperity

The sixth plenary session of the 19th CPC Central Committee pointed out that the establishment of the People’s Republic of China “put an end to China’s history as a semicolonial,semi-feudal society,to the rule of a handful of exploiters over the working people”(People’s Publishing House,2021,p.8).The Chinese people have since become masters of the country,and the system of the people running the country provides the most essential political guarantee for achieving socialist common prosperity.Politically,socialist common prosperity must be aimed at a good life for all the people (Luo &Wu,2022),the life that the people aspire for.This represents the political ideal pursued by all Party members and the ideal political state of the socialist society,which is a manifestation of the people running the country.At the same time,what essentially differentiates socialist common prosperity from capitalist welfare society is whether the people are running the country.In a country run by the people,everyone should be able to live a good life with dignity and decency,and the masses of hard-working people must be truly combined with the means of production (Peng,2022).

“Enlarging the Pie”: Improving the Systems That Raise the Effciiency and Vitality of Productive Forces

Humanity relies on the production of material goods for survival and development.When productive forces keep improving along with the times and become so powerful that productive relations can no longer catch up,the productive forces themselves will be impeded (Zhang &Wu,2022).The precondition for realizing common prosperity is improving productive forces and enlarging the “pie,” so improving the relevant systems is imperative to raise productive efficiency and stimulate human vitality (Zhang,2022).

Upholding and Improving the Basic Economic System in Which Public Ownership is the Mainstay

Highly developed productive forces are the precondition for achieving common prosperity (Ou,2022),but the process is not automatic—it has to be adjusted and pushed by a sound,rational,and suitable economic system.In the capitalist society,the Industrial Revolution significantly boosted productive forces,but that didn’t give birth to any trend or “ray of hope” toward common prosperity.Engels described in hisAnti-Dühringwhat a society of common prosperity should be like: it ensures “for every member of society,by means of socialized production,an existence not only fully sufficient materially,and becoming day by day more full,but an existence guaranteeing to all the free development and exercise of their physical and mental faculties” (People’s Publishing House,2009,p.563).This is why capital-centered capitalist private ownership cannot achieve common prosperity.

American institutionalist economist John Kenneth Galbraith said in the 20th century that developed countries in Europe and America demonstrated an extreme contrast between private richness and public poverty.Herbert Marcuse further exposed,without reserve,capitalist states as “sick societies” of material abundance and mental misery (Wei,2020).This leads to the tragic conclusion that as far as a national institution is concerned,most capitalist countries in modern times are neither founded nor designed nor intended to create common prosperity for their people (Zhang,2019).

China,in comparison,has adhered to the basic economic system in which public ownership is the mainstay,and diverse forms of ownership have developed together since the beginning of reform and opening up.This is an important institutional guarantee for achieving common prosperity as we advance Chinese modernization.The system with public ownership as the mainstay not only indicates that China adheres to socialist production but also makes sure all people share social wealth and development outcomes.Xi Jinping,general secretary of the Communist Party of China (CPC) Central Committee,has repeatedly emphasized that the principal position of public ownership and its leading role in a national economy must not be shaken,as that is the institutional guarantee for Chinese people of all ethnic groups to share the fruits of development (Central Compilation&Translation Press,2017,p.63).Only by upholding and improving the basic economic system with public ownership as the mainstay will we be able to promote common prosperity steadily.

Advancing and Improving the High-Level Socialist Market Economy

The socialist market economy is the result of combining Marxism with Chinese reality.It is a system that suits China’s national conditions.By combining socialism with the market economy,it is freed from the shackles of the planned economy while appropriately regulating the disorder of the market economy.On the one hand,it showcases the superiority of the socialist system and provides the political guarantee for achieving common prosperity for all;on the other hand,it brings out the strengths of the market economy and gives a strong boost to productive forces and material wealth in the society (Zhou &He,2022).On the new journey of Chinese modernization,we must take solid steps towards common prosperity,work faster to improve the socialist market economy system,and ensure more balanced,coordinated,and inclusive development (Xi,2022).An effective market and a responsible government must work organically as a whole so that productive forces and productive relations can develop in balance and common prosperity for all can be achieved.

Strong productive forces are the material foundation for common prosperity,for which the market’s decisive role in resource allocation should be brought into full play.To do that,we first should improve the property rights system.We should implement regulations on property-right-related incentives,law enforcement,and judicial practices on the basic principle of fairness and justice to lay a solid foundation for developing the socialist market economy in China in an orderly manner.Secondly,we should improve the system of fair competition.A unified market access negative list system should be conducted strictly and the restrictions to market access loosened gradually so that every entity has equal access to the market and a level playing field is ensured.

At the same time,the government should better exert its regulatory function.First,a macro-regulatory system featuring the coordinated development of multiple sectors should be established to regulate and coordinate employment,industrial development,consumption,and other aspects more scientifically and effectively.Second,the government should keep livelihood sectors,such as education,health care,and housing,from getting excessively competitive and market-oriented,thus providing a livelihood guarantee for achieving common prosperity.

Establishing and Improving Relevant Systems to Promote High-Quality Economic Development

As we press ahead with Chinese modernization,the Chinese economy is transitioning from a stage of high-speed growth to a stage of high-quality development.The Resolution of the CPC Central Committee on the Major Achievements and Historical Experience of the Party Over the Past Century passed at the sixth plenary session of the 19th CPC National Congress states,“The GDP growth rate could not serve as the sole yardstick of success for development.Rather,it was imperative to achieve high-quality development in which innovation is the primary driver.Coordination is an endogenous trait,eco-friendly growth prevails,openness to the world is the only way,and shared growth is the ultimate goal to propel transformative changes in the quality,efficiency,and impetus of economic development” (People’s Daily,2021).High-quality development,a buzzword nowadays,is a vital theoretical guideline for China’s economic and social development in the current stage.More importantly,it is the only way to realize Chinese modernization and common prosperity.

As mentioned earlier,the precondition for achieving the great goal of common prosperity is sufficient social wealth,and high-quality economic development is the main approach to increasing wealth,which makes formulating relevant systems that propel such development all the more imperative.We should quicken the efforts to form these systems,including the system of indicators,policies,standards,statistics,and performance evaluation and assessment,and create and improve an institutional environment conducive to high-quality development.

Establishing and Improving Auxiliary Systems That Promote Common Prosperity With Digital Economy

With the continuous advancement of digital technologies such as AI,big data,and blockchain,the digital economy now occupies a crucial position in China’s economy and society and has driven the rapid progress made by many industries.This has created great technical and material conditions for achieving common prosperity for all.But despite its accelerating effect,the digital economy cannot automatically lead to common prosperity;it needs to be regulated and spurred on by relevant systems.Marx severely criticized the situation in which digital technologies,with no regulation or guidance,advance according to capitalist logic,which is highly likely to cause society to split asunder and the people to become increasingly polarized.That is exactly the opposite of common prosperity.Therefore,it is imperative to establish systems that ensure the digital economy promotes common prosperity as an important means and that its advantages are fully exerted within the framework of the socialist system.In the meantime,more efforts should be made to supervise digital platforms,reward platform innovation in due time,and mitigate the labor-capital conflict in the digital economy to prevent unfair competition among digital platforms and perfect the digital economy governance system(Zhou &Guo,2022).

“Sharing the Pie Well”: Improving the Systems That Preserve Fairness and Adjust the Productive Relations and Distribution

The report to the 20th CPC National Congress emphasizes that “The system of income distribution is the foundational system for promoting common prosperity.We will keep distribution according to work as the mainstay with multiple forms of distribution existing alongside it,and we will build an institutional framework under which primary,secondary,and tertiary distribution are well coordinated and mutually complementary.” (Xi,2022,pp.46–47)Therefore,to promote common prosperity,we must perfect the systems that preserve fairness and adjust the productive relations and the relation of distribution (Zhang,2022).

Accelerating the Reform of the Primary Distribution System That Are Formed Through the Market Mechanism

Primary distribution is determined by the market mechanism and is predominantly focused on efficiency.In primary distribution,a sole emphasis on efficiency will likely widen the income gap,whereas too much stress on equality may dampen economic vigor and vitality.Therefore,the primary distribution system should be reformed at a faster pace.It is suggested that institutional arrangements on three factors—labor,capital,and land—be improved.First,it is important to structure relevant systems from the labor perspective,mainly formulating and improving the rules on minimal wage,Hukou or household registration,and employment.

A definite and unified standard for minimal local wages should be set to safeguard the workers’ basic rights and interests.Regarding Hukou,relevant policies should be made on the grant of urban Hukou whereby cities in the same region can agree on the same standards,the point-based Hukou system should be improved,and a new people-centric type of urbanization should be implemented.Regarding employment,the flexible employment assurance system should be improved to better adapt to local conditions,and a system against employment discrimination should be put in place to ensure all working-age people can find jobs through fair competition and with dignity in all sectors.

Second,it is important to structure relevant systems from the capital perspective,which mainly includes improving the anti-monopoly system and the system of protecting property income.Regarding the anti-monopoly system,more efforts should be made to establish a system with theAnti-Monopoly Lawplaying a leading role,assisted by other laws and regulations,so as to ensure a fair and just market environment.That is the natural requirement for achieving common prosperity (China Youth Daily,2021).Regarding the system of protecting propertybased income,relevant rules should be made to regulate and protect the property income of enterprise employees,investors,and other stakeholders.

Third,it is important to structure relevant systems from the land perspective,which mainly aims to protect the rightful,lawful,land-based rights and interests of land contractors,namely farmers.Relevant regulations should be formulated to keep land from being concentrated in the hands of a few and to protect the interests of the majority of the people.

Strengthening the Secondary Distribution System Developed and Regulated by the Government

Secondary distribution is an important way of distribution implemented by the state through taxation,social security,transfer payment,and other means to regulate primary distribution,narrow the income gap,and promote social equity.The report to the 20th CPC National Congress specifically emphasizes that “We will enhance the roles of taxation,social security,and transfer payments in regulating income distribution” (Xi,2022,p.47).To strengthen and perfect the government-led secondary distribution system,we will mainly establish and improve the taxation system,social security system,transfer payment system,and systems aimed to enlarge the middle-income group.

First,we should improve the modern taxation system.Regarding improving the legal system concerning individual income tax,tax is an important means of regulating income distribution,and we will gradually incorporate property income and capital income in the comprehensive income tax.Regarding the enactment of laws on inheritance tax,many countries have tried to control and narrow the income gap with inheritance tax to prevent the widening of the wealth gap that may arise from the inheritance of huge amounts of legacies (People’s Daily,2021).

Second,we should improve the social security system.Regarding improving the old-age insurance system,we need to perfect the social security fund system and keep the basic oldage insurance system stable in the long term.Regarding strengthening systems that allow more people in flexible employment to join social insurance programs,we need to enlarge the scope of people covered by social security and improve the personnel structure to ensure everyone can access suitable social security through reasonable and legal means.Regarding strengthening medical care systems,we should pay special attention to enacting the medical security law and other related laws.

Third,we should formulate and perfect the transfer payment system.China has already established a relatively rational transfer payment system,but a complete law is still lacking and must be enacted as quickly as possible.

Fourth,we should design and develop the institutions necessary to enlarge the middleincome group.The report to the 20th CPC National Congress states,“We will work to raise the share of personal income in the distribution of national income and give more weight to work remuneration in primary distribution” (Xi,2022,p.47).In the long term,how soon we can achieve common prosperity may probably depend on how fast we can enlarge the middleincome group.The larger this group grows,the sooner we will achieve common prosperity.

Prioritizing the Establishment of a Tertiary Distribution System Driven by Social Morality

Tertiary distribution is a strong supplement to primary and secondary distribution.It is the result of a generally higher level of social morality and of a greater emphasis on the cultural and ethical aspects of life after people’s material life has been improved to a certain level.Tertiary distribution is not to rob the rich to help the poor,such as simply transferring the rich’s wealth to the poor.It is to coordinate and distribute social wealth in a reasonable,legal,and relatively balanced way in accordance with proper procedures.As a useful supplement to our efforts towards common prosperity,tertiary distribution is an important means to “sharing the pie well” as well as a key driving force for “enlarging the pie.”

Now that we’ve established the importance of an effective tertiary distribution system in achieving common prosperity,it is necessary to put in place relevant systems around it,particularly taking faster steps to revise and refine theCharity Law of the People’s Republic of China.Relevant data show that China registered a total charity donation of more than 300 billion in 2019.It is high time that relevant laws and regulations were formulated to supervise and regulate the use of such a huge amount of money and specify the government’s function of supervision and service in tertiary distribution,namely the charity cause.On that basis,systems concerning charity trusts and the governance and registration of charity organizations should be further improved.A sound tertiary distribution system will help make the distribution of social wealth much more equitable and reasonable and consequently help achieve the goal of common prosperity in the course of Chinese modernization.