Dato’ Seri CHEAH Cheng Hye, Co-Chairman and Co-Chief Investment Officer at Value Partners Group, feels China’s Common Prosperity policy will influence the markets over the coming year, he says,
China’s Common Prosperity policy has led to many headlines in 2021, following related crackdowns in areas such as private education services alongside technology platforms offering access to video games, and property developers.
The policy’s primary driver is to raise roughly half the country’s population into the middle classes by 2035, with an income equivalent to that seen in Eastern Europe. That means going from 340 million classified as middle class today out of a population of 1.4 billion, increasing to 500 million by 2025, and 750 million by 2035.
In a presentation at the NextChina 2021 Conference Dato’ Seri CHEAH stated that: “The reality of Common Prosperity is that it is mainly about long-term structural reforms. President Xi himself stated it will take decades for Common Prosperity to be achieved.”
The chief risk to Common Prosperity lies in property and related services, together accounting for some 20-25% of the Chinese economy. Over-regulation when trying to “tame the monster” could trigger social and financial instability.
However, other factors point to a successful outcome of the policy, such as the roughly 9 million college graduates annually, many specialised in STEM subjects (science, technology, engineering, mathematics).
“This is a very important reason why there is so much optimism within China that the Common Prosperity program, despite all the hassles, all the problems can eventually or largely succeed possibly by 2035. This large pool of skilled and young talent, to some extent, offset the declining birth rate and gives China the opportunity to move up the technology ladder, the skill level.”
