With fears of further economic slowdown, China is said to have decided to suspend President Xi Jinping’s “common prosperity” initiative, a media report claimed on Monday. 

To end widening gap between the rich and poor in the world’s largest population, Xi introduced this policy last August at the 10th meeting of the Central Committee for Financial and Economic Affairs.

However, economic data coming out of the world’s second-largest economy amid the COVID-19 pandemic pressure appears to have put a spanner in the ambitious project of Xi, who is expected to seek a third term later this year at a summit of the Communist Party of China (CPC).

“China has decided to suspend the full promotion of President Xi Jinping's ambitious ‘common prosperity’ policy for the time being, with the economy slowing amid the COVID-19 pandemic,” a Chinese source familiar with the matter told Japan’s Kyodo News on Monday.

China had decided to levy more regulations on the country’s lucrative sectors including the IT and financial industries.

Xi explained: “Common prosperity will raise incomes of low-income groups, promote fairness, make regional development more balanced, and will stress on people-centered growth.”

“We will first make the pie bigger and then divide it properly through reasonable institutional arrangements. As a rising tide lifts all boats, everyone will get a fair share from development, and development gains will benefit all our people in a more substantial and equitable way,” Xi later told World Economic Forum.

“Xi's push to attain common prosperity, however, has been fanning concern that the world's most populous country would become a less attractive market, as the goal may place a heavy burden on the rich so that the government can coercively rectify economic inequality,” the report by Kyodo News said. 

However, as China “has shown clear signs of losing growth momentum against a backdrop of the nation's ‘zero-COVID’ policy,” the report said, adding: “Xi has concluded that strengthening surveillance on companies would shrink corporate activities further.”

Earlier in the day, China’s National Bureau of Statistics said the country’s economy expanded 4.8% on an annual basis to 27 trillion yuan ($4.25 trillion) in the first quarter of the current year.

The focus of the CPC appears to have shifted to stabilizing economic and social development.

Besides paying hefty amounts of fines under China’s anti-monopoly laws, “big Chinese enterprises and business leaders are believed to be compelled by the central authorities to take steps that could contribute to narrowing income disparities, such as making donations and providing social support.”

Several factors seem to have added to the economy “losing momentum” including a lockdown in many regions of China which has badly hit the supply chain inside the country besides disruption of the global supply chain due to Russia’s war on Ukraine.

China has set a target of 5.5% growth in gross domestic product this year./aa