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Opinion | What Beijing must do to get Covid-wary Chinese consumers to spend more and save less

  • Pity that some ‘common prosperity’ ideas have yet to gain traction as Covid-19 has exposed holes in China’s social welfare and dented people’s incomes
  • To get consumption to return and avoid permanent economic scarring, Beijing must do more to boost the social safety net and incomes

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A woman takes a selfie at an outdoor shopping centre in Beijing on January 5. There is a risk the Covid-19 crisis has intensified the motivation to save. Photo: AP
It has been a rough few years for China’s economy, hit by a triple whammy of shocks. The zero-Covid policy shut down large parts of the service sector. A regulatory squeeze on property developers delivered a huge shock to what for years has been a critical engine of growth. And then there was the government’s announcement of “common prosperity”, which was greeted by some investors as something akin to a return to collectivism.

Interpreting common prosperity in this way was extreme, especially given Beijing’s long-standing hostility to anything that smacks of “welfarism”. Official explanations of common prosperity reiterated this stance, quoting President Xi Jinping as saying that “the government cannot take on everything” and that China should “not aim too high or go overboard with social security”. It is difficult to interpret that as a siren call for socialism.

In any case, along with ending zero-Covid and backtracking on the property squeeze, the authorities since November have gone further to try to draw a line under the worries about common prosperity. What had been made out to be a signature phrase of the Xi era received not one mention in the statement issued at the end of the government’s big annual economic meeting in December.

It is a pity, for society but also for the economy, that some of the ideas behind common prosperity continue to struggle to gain traction in China. If improving access to public services and raising incomes is socialism, then China is not nearly socialist enough.

Internationally, strengthening the social security net is a usual part of efforts to tackle inequality. But according to the International Monetary Fund, China’s spending to protect workers and the vulnerable in 2018 trailed behind that of other large emerging market economies.

This is an inadequacy that was likely to be exposed – if not already from published statistics – as the Covid-19 wave spreads.

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