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The View | Foreign firms will have to adapt to China’s ‘common prosperity’
- At a minimum, companies will need to comply with new policies and regulations. At the other end of the scale, even the fundamental nature of some businesses could be redefined
- Common prosperity will favour more collective interests, but that does not mean it will be done at the cost of legitimate individual interests
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On August 17, President Xi Jinping explained the concept of “common prosperity” as a key requirement of socialism and a major feature of Chinese-style modernisation. Major policies are in for a sea of changes.
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These range from reforming income distribution to more equal opportunities in education, health care, pensions and housing; to addressing monopolistic behaviour; and to extending boundaries of common prosperity from physical wants to mental fulfilment. Reducing income inequality through primary, secondary and tertiary wealth redistribution will be a key focus.
The major objective of common prosperity is to recast the socioeconomic pyramid into an oval-shaped structure, with the widest part representing the middle class. With this change, average income is expected to continue to increase.
Common prosperity will favour more collective interests, but that does not mean it will be done at the cost of legitimate individual interests. Companies should continue to pursue profit but will also need to be conscious of the new “red lines” redefining monopolistic behaviour, data security and societal values to provide a more equitable environment for the younger generation, better basic welfare for employees and the like.
As policies, technology and demands change, all companies need to adapt. The impact of common prosperity on foreign-owned multinational corporations will range from basic and universal to sophisticated and specific.
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SCMP Explains: China’s five-year plans that map out the government priorities for development
SCMP Explains: China’s five-year plans that map out the government priorities for development
At the basic level, it means businesses will need to take better care of their employees, providing more benefits with reasonable working hours. Multinationals will need to assess their contributions as corporate citizens in China.
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