China warns its local governments don’t be overambitious in carrying out ‘common prosperity’ drive
- National Development and Reform Commission (NDRC) warns local authorities against over-promising on social welfare amid Beijing’s push to reduce inequality
- Local governments should focus on essential services such as education, housing, medical and elderly care, says the nation’s top economic planning agency
China’s top economic planning agency said on Thursday the nation’s growth is still well behind developed countries and local governments should not be overambitious when it comes to implementing “common prosperity”.
“There is still a big gap between our country’s development level and that of developed countries,” said Ha Zengyou, head of the NDRC’s department of employment, income distribution and consumption, in a press briefing on Thursday.
“We must ensure and improve people’s livelihood on the basis of economic development and sustainable financial resources.”
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Local governments should focus on addressing essential services such as education, medical and elderly care, as well as housing, Ha said.
“For local party committees and governments, in the process of promoting common prosperity, we must adhere to what we must do and must not do.”
China has transformed into an economic powerhouse since launching a series of reforms in 1978, including opening its markets to foreign investment. But its rapid development has also deepened inequality, especially between urban and rural areas, which is a potential threat to social stability.
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In July, one of China’s richest provinces, Zhejiang, outlined a strategy to narrow its wealth gap by 2025, which is being touted as an example for the rest of the country.
The Zhejiang government has prioritised raising wages for poor workers, setting a target to boost the proportion of households with an annual disposable income of between 100,000 (US$15,785) and 500,000 yuan to 80 per cent, while 45 per cent of its households should have an income of 200,000 to 600,000 yuan.
Chen Zhong, deputy director of the Zhejiang provincial department of human resources and social security, said the government would create jobs with a minimum wage of 4,500 yuan per month, regardless of qualifications or age.
It would also offer subsidies and loans of between 100,000 and 500,000 yuan to college graduates who want to start businesses in the province. Local authorities would pay up to 80 per cent of the loan above 100,000 yuan even when the business fails, Chen said at the NDRC briefing.
To attract more young workers in the elderly care sector and agricultural industry, the government would provide individuals an annual employment subsidy of 10,000 yuan for three years, Chen added.
“For college students who come to Zhejiang for their internships, living allowances are provided,” he said. “For graduates with financial difficulties, a job-seeking and entrepreneurial subsidy of 3,000 yuan per person will be issued.”
China’s stricter regulation of real estate developers has led to a downturn in the country’s red-hot property sector, hurting local government finances.
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Beijing has sought to provide a more sustainable source of fiscal income by announcing last year it would introduce pilot property taxes in selected cities over the next five years.
The tax cuts will reduce local government dependence on land sales and support social equality.
But analysts have questioned how quickly they can be implemented.
“Even with political conditions seeming to warm up for such steps, it still would take several years for such tax changes to go through the political process and be approved,” said Oxford Economics in a note in August last year examining China’s common prosperity drive.
“Improving labour protection and rural land-use rights could be implemented faster.”
