China’s impressive recovery from the COVID-19 pandemic has led to European companies operating in China forecasting a positive near-term financial outlook. However, while the start of a new year brings with it hopes for continued improvement, we should not be naïve as we enter 2022. In recent months, I have dedicated a significant part of my messaging to the fact that China’s long-term growth trajectory and future development path is by no means certain.
The uncertainty that hangs over China’s future is epitomised by the latest buzzword, ‘common prosperity’. At its core, common prosperity is cited as a concept that will see reforms being enacted to address inequality in China. While Beijing asserts this will entail creating an ‘olive-shaped social structure’—where the bulk of society is composed of the middle class—it remains unclear how this will be achieved in practice.
For European businesses, question marks remain over which sectors may be impacted by ‘common prosperity measures’. From crackdowns on private tutoring and online gaming, to eye-wateringly large, public donations made by Tencent and Alibaba, a broad range of seemingly unrelated events have been conflated and given as possible examples of, or responses to, common prosperity.
Related policies that have been introduced so far—mostly local initiatives that lack specific measures—have done little to shed any light on this issue. One need look no further than the Zhejiang Common Prosperity Demonstration Zone, which proposes the introduction of modest social targets and offers little new in terms of broader welfare reforms, for an example. This type of campaign-style, slogan-driven approach to policy has been seen many times before, and rather than assure foreign investors, it tends to fuel further uncertainty. This is surely at odds with Beijing’s aims. European companies require a business environment that is transparent and predictable in order to make long-term investment plans.
To promote prosperity and raise living standards across the board, consistent and strong policies are needed. As detailed in the Chamber’s European Business in China Position Paper 2021/2022, World Bank projections illustrate that should China embark on a path of comprehensive reforms, then its gross domestic product per capita could be 65 per cent higher by 2050 than if it only implements limited reforms. The best approach to developing an ‘olive-shaped society’ therefore clearly is not to impede business, but to facilitate it.
As China seeks to
reduce structural inequalities, European businesses—many of which are world leaders
in areas such as developing pension markets, healthcare, and environmental,
social and (corporate) governance—have much insight to offer. They have
accumulated experience working with policymakers in their home markets to
overcome similar demographic and social challenges. The European Chamber and
its member companies remain ready to engage in constructive dialogue at all
levels to help China achieve common prosperity for all.
 Why I’m investing only 20% of my portfolio in China, The Woke Salaryman, 19th November 2021, viewed 13th December 2021, <https://thewokesalaryman.com/2021/11/19/why-im-investing-only-20-of-my-portfolio-in-china/>
 Alves, Joice, China wealth plans threaten European luxury stocks’ post -COVID boom, Reuters, 20th September 2021, viewed 7th December 2021, <https://www.reuters.com/business/china-wealth-plans-threaten-european-luxury-stocks-post-covid-boom-2021-09-20/>
 Weller, Torsten, What Does ‘Common Prosperity’ Actually Mean?, China-Britain Business Focus, 20th October 2021, viewed 7th December 2021, <https://focus.cbbc.org/what-does-common-prosperity-actually-mean/?nowprocket=1#.Ya8TY5FBw2x>