Exclusive interview with Li Shi: "Regulating the wealth accumulation mechanism" is not "equalizing the rich and the poor" | Beijing News Comment
2024-08-06
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Focus on the series of comments on the Third Plenary Session of the 20th CPC Central Committee
From July 15 to 18, 2024, the Third Plenary Session of the 20th Central Committee of the Communist Party of China was held in Beijing. The meeting reviewed and passed the "Decision of the Central Committee of the Communist Party of China on Further Comprehensively Deepening Reforms and Promoting Chinese-style Modernization", and the full text was announced on July 21.
The Third Plenary Sessions of the CPC Central Committee have always focused on reform and development, and are conferences that attract the attention of the whole country and even the world. Historically, many major reform measures and guidance on development directions have been initiated at the Third Plenary Sessions. The Third Plenary Session of the 20th CPC Central Committee is no exception. The decisions reviewed and adopted at this plenary session have drawn a new blueprint for the future development of China's economy and society.
Starting today, the Beijing News Commentary Department will launch a series of commentaries to provide in-depth interpretation of all aspects of this decision that affect the national economy and people's livelihood for the benefit of readers.
▲Professor Li Shi. Photo provided by the interviewee
Expert Business Card Li Shi, a famous economist, senior professor of liberal arts at Zhejiang University, dean of the Institute of Sharing and Development at Zhejiang University, deputy director of the Academic Committee of Zhejiang University, and dean of the Institute of China Income Distribution at Beijing Normal University, has long been committed to research in the field of income distribution.
Wealth is the direct material basis for people's well-being, and the wealth accumulation mechanism is related to common prosperity.
The full text of the "Decision of the Central Committee of the Communist Party of China on Further Comprehensively Deepening Reforms and Promoting Chinese-style Modernization", which was released on July 21, proposed in the "perfecting the system of institutions for safeguarding and improving people's livelihood" that the wealth accumulation mechanism should be standardized.
This statement has once again aroused public attention to the issue of wealth accumulation. In the previous period, the issue that was mentioned more frequently and the public was more familiar with was the issue of income distribution.
In 2022, the report of the 20th CPC National Congress proposed for the first time to "regulate the mechanism of wealth accumulation". This was emphasized again in the "Decision" of this important plenary session this year, which undoubtedly reflects the importance and urgency of regulating the mechanism of wealth accumulation.
In fact, this also puts forward clear requirements for further improving the income distribution system and mechanism and promoting the fairness and sustainability of residents' wealth accumulation.
So, how should we understand the task requirement of "regulating the wealth accumulation mechanism"? To this end, the Beijing News interviewed Professor Li Shi, a famous economist and dean of the Institute of Sharing and Development at Zhejiang University.
Professor Li Shi has long been committed to the research of economic thought, economic transformation and development, and income distribution, and has made many theoretical contributions in the fields of my country's income distribution system reform, rural poverty alleviation and development, etc.
In response to some people's doubts about the "standardization of wealth accumulation mechanism", Professor Li Shi said in an interview that this is not to restrict the growth of residents' wealth, nor is it to "equalize the rich and the poor" or "kill the rich and help the poor." The purpose of regulation is to narrow the income gap and wealth gap and ultimately achieve common prosperity.
Realizing common prosperity actually means a high level of wealth accumulation and achieving true prosperity for the people, which requires encouraging people to get rich through hard work and accumulate more wealth legally.
Professor Li Shi emphasized that this misunderstanding needs to be clarified in a timely manner to avoid affecting the relevant reform process.
It does not limit the growth of residents' wealth.
Beijing News:The issue of income distribution has been discussed more frequently before and people are more familiar with it. In 2022, the report of the 20th National Congress of the Communist Party of China first proposed to "regulate the mechanism of wealth accumulation." This year, this requirement was mentioned again in the "Decision" of this plenary session. What is the background?
Li Shi:The Third Plenary Session of the 20th CPC Central Committee reiterated the need to "regulate the mechanism for wealth accumulation". A major background to this is that the issue of wealth growth and accumulation among Chinese residents has become an issue that must be taken seriously.
Before 2000, the amount of wealth of Chinese residents was very small. However, in the past 20 years or so, with the rapid growth of residents' income, and driven by the reform of the public housing system, the rapid expansion of the real estate market and the rapid rise in housing prices, as well as the restructuring of state-owned and collective enterprises, the wealth of Chinese residents has accumulated rapidly.
In particular, during the period from 2002 to 2018, the actual annual growth rate of residents' wealth in my country exceeded 13%, which was much higher than the growth rate of residents' income during this period. But what should be noted is that the wealth gap between Chinese residents is also widening sharply.
The widening wealth gap among residents is closely related to the irregular and imperfect wealth accumulation mechanism. Therefore, under the overall requirement of common prosperity, the policy idea of "standardizing the wealth accumulation mechanism" has been put on the agenda.
Beijing News:What is the relationship between the wealth accumulation mechanism and the income distribution order? What is the fundamental purpose of regulating the wealth accumulation mechanism?
Li Shi:An imperfect wealth accumulation mechanism will not only lead to unfair wealth distribution and widen the wealth distribution gap, but will also affect the fairness of income distribution.
There is a mutually influencing and mutually reinforcing relationship between the wealth accumulation mechanism and the income distribution mechanism. Residents’ wealth can bring property income, which, as part of residents’ total income, directly affects residents’ income growth and income distribution.
At present, although the income gap between urban and rural areas in my country has declined significantly, it is still at a high level. One of the important factors is that the growth of property income of urban residents far exceeds that of rural residents.
In 2022, the National Bureau of Statistics' household survey data showed that property income of urban residents accounted for about 11% of their disposable income, while for rural residents this proportion was less than 3%.
Therefore, standardizing the wealth accumulation mechanism will also help to form a more fair and reasonable income distribution pattern.
This is also the profound meaning of the "Decision" of this plenary session, which proposes to standardize the income distribution order and the wealth accumulation mechanism in the "perfect system for protecting and improving people's livelihood". The basic path is to effectively increase the income of low-income groups, steadily expand the size of the middle-income group, and reasonably adjust excessive income.
The proposal of "regulating the mechanism of wealth accumulation" is only to solve various irregularities, even non-compliant and illegal problems in wealth accumulation and wealth distribution, rather than restricting the growth of residents' wealth, or even "dividing wealth equally" or "fighting against the local tyrants and dividing the land" as some people in society understand. This understanding is a complete misunderstanding.
Our country's basic social system is to protect private property, and to protect wealth from legal and compliant sources. This is a basic national policy that will not be shaken.
Moreover, our country's residents have just begun to accumulate wealth. Except for a small number of people, the property accumulation level of the vast majority of families is still limited. It is necessary to continuously improve the wealth accumulation level of all residents by increasing income growth, developing the capital market, and increasing opportunities for wealth sources.
Because achieving common prosperity not only means that the people have a high level of income, but also means a high level of wealth accumulation, which is real wealth for the people. People need to be encouraged to get rich through hard work and accumulate wealth legally.
Standardization needs to start from the source
Beijing News:Generally speaking, what are the channels and mechanisms for residents to accumulate wealth? And how are they usually regulated?
Li Shi:For a family, wealth accumulation is mainly achieved through two channels.
The first is income level and income growth. When people have income, part of it is used for current consumption, and the rest is saved.
This part of savings will also be converted into various forms of assets, and can be put into a bank as a deposit, or used to purchase stocks, financial bonds, etc. to become financial assets. If used to purchase a house, it will become real estate, and if used to invest in a business, it will become a productive asset.
The second is the appreciation of various assets, that is, the rise in asset prices. The rise in asset prices will increase the wealth of residents. For example, in the past 20 years or so, my country's housing prices have doubled, which has led to a significant increase in the value of many families' properties, creating many families with assets of millions or even tens of millions.
For example, some people have made huge profits from stock investment, and they have also increased their wealth by taking advantage of the rising prices of financial assets. Correspondingly, when asset prices fall, some families' wealth will also shrink.
Of course, in reality, some people do not accumulate wealth through normal procedures, but through some extraordinary, irregular, or even illegal means, such as officials soliciting and accepting bribes, rent-seeking for power, collusion between officials and businessmen, insider trading, erosion of state-owned assets, and privatization of state-owned assets.
This situation mostly occurs in countries where the rule of law is not sound, government power is not supervised and restricted, and factor markets are imperfect.
To regulate the mechanism of wealth accumulation, we need to start from the source. First of all, we need to regulate the order of income distribution and improve the income distribution system. Income is the main source of wealth accumulation. If the income comes from legitimate and legal sources, the wealth converted from the income will be legitimate.
Secondly, we need to improve the capital market, establish a more perfect and fair capital market, and eliminate the problems of monopoly, entry barriers, excessive administrative intervention, price distortion, etc. in the production factor market. In particular, we need to reduce the government's "rent-setting" behavior in the factor market.
In addition, we must avoid large fluctuations in asset prices and huge speculative profits, and we also need to continue to intensify anti-corruption efforts.
There are also reasonable aspects to the widening gap
Beijing News:When did the accumulation of wealth of Chinese households begin? What characteristics has my country's wealth accumulation formed to date?
Li Shi:The accumulation of wealth among Chinese residents started relatively late, and the wealth of ordinary residents has basically been accumulated in the past 20 years.
In the 1980s and 1990s, the financial assets of Chinese residents mainly consisted of savings deposits and low-end durable consumer goods. Urban residents rarely owned private properties and productive assets were also very limited.
By 1989, the average bank deposit per capita was only around 530 yuan. Even in 1999, it had risen to around 5,500 yuan, which was enough to buy a TV or a refrigerator.
The rapid appreciation of residents' property began after 2000. First, residents' income increased rapidly; second, the public housing system was reformed, and the real estate market developed rapidly by selling it to individuals at very favorable prices; third, individual private enterprises developed rapidly; and fourth, the restructuring of state-owned enterprises provided opportunities and conditions for residents to accumulate wealth through different channels.
The imperfect wealth accumulation mechanism has led to obvious irrational wealth distribution. But we should also see that the widening gap in wealth distribution has both irrational and rational aspects.
For example, some private entrepreneurs have made considerable profits through legitimate investment, entrepreneurship and innovation, while taking risks. This way of wealth accumulation is certainly worthy of recognition and protection.
However, some people take advantage of the profit opportunities brought by market imperfections, or even abuse their power to gain huge wealth. Such wealth accumulation needs to be regulated and adjusted.
Beijing News:Why do these problems arise? Is it a phased phenomenon that naturally accompanies wealth accumulation, or is there something wrong with the relevant mechanism?
Li Shi:There are many reasons for the problems with wealth accumulation among our country's residents. They include problems with the wealth accumulation mechanism as well as problems at the larger institutional level.
For example, if we do not carry out substantive reforms in the political system, reform the cadre promotion system, and exercise effective supervision over power, it will be impossible to completely solve the problem of the source of wealth accumulation caused by the abuse of power for personal gain, the use of power for personal gain, and collusion between officials and businessmen.
For example, if we cannot improve the construction of factor markets and establish a unified national market, market defects and distortions will provide some people with opportunities to seek profits and become the main source of their wealth accumulation.
For another example, my country has already formed a huge amount of state-owned assets, which are the wealth of the whole nation accumulated through decades of hard work of the people of the country. To ensure the safety of state-owned assets and maintain and increase their value, a complete management system and supervision mechanism are needed, otherwise it will cause the loss of state-owned assets and become the source of private wealth accumulation for some people.
Therefore, regulating the wealth accumulation mechanism requires comprehensive and in-depth reform, and it must be substantive and effective reform.
Reform will be a long process
Beijing News:What historical experiences and practical countermeasures do we have for these specific problems in the accumulation of wealth among our country’s residents?
Li Shi:It should be said that we do not have much historical experience in this regard because this is a new issue.
"Standardizing the wealth accumulation mechanism" is also a reform task proposed by the 20th National Congress of the Communist Party of China, and some specific policies have been designed to implement this task.
Because this will be a long-term problem in our country's future development process, we should pay enough attention to it from now on, and start designing and promoting corresponding systems and policies.
On the one hand, the reform of the residents’ wealth accumulation mechanism should be combined with reforms in other areas to form an interactive and interconnected way of promotion and avoid the synthetic fallacy of multiple reforms.
On the other hand, we should start from practical problems, adhere to problem-oriented reform, and design reform plans for specific problems in the accumulation of residents' wealth. In particular, we should realize that reform in this area will be a long process and require long-term efforts.
Beijing News:We know that different personal abilities and family backgrounds may lead to different wealth accumulation. Therefore, the gap between the rich and the poor has always been a global problem, and it has even intensified. However, we have repeatedly emphasized common prosperity. So, what is the relationship between wealth accumulation and common prosperity? How can we achieve common prosperity while encouraging people to get rich through hard work and accumulate wealth legally?
Li Shi:Theoretically, there are three indicators to measure the living standards and well-being of a country's residents: income, wealth (property) and public services. We believe that the levels and differences of these three indicators can become the main aspects of measuring the degree or progress of common prosperity.
In other words, achieving common prosperity means that the income level of all residents is high and the income gap is small; the wealth level is high and the wealth distribution gap is small; the public service level is high and basic public services are equalized.
As for wealth indicators, promoting common prosperity requires continuously improving the level of wealth accumulation of residents, while paying attention to narrowing the gap in wealth distribution. However, it is also necessary to pay special attention that narrowing the income gap and wealth gap does not mean "equalizing the rich and the poor", but a differentiated prosperity.
We should also be especially vigilant. There are always people in society who misunderstand "common prosperity" as "equal prosperity" and the realization of common prosperity as "killing the rich and helping the poor." If this is not clarified in a timely manner, it is likely to have a negative impact on relevant reforms.
You know, even in a society of common prosperity, there will still be differences in income and wealth between people and groups, but the differences will not be as big as they are now. Our society needs to have such a rational consensus.
By 2029, if the reform tasks proposed by the Third Plenary Session of the 18th CPC Central Committee can be completed as scheduled, some indicators of common prosperity will improve - residents' income level and wealth accumulation level will further increase, the income gap will narrow, and the quality and accessibility of public services will be significantly improved.
Written by Beijing News reporter He Rui
Editor/ Chi Daohua
Proofreading/ Chen Diyan
