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China's Reform Spree in 2021: Common Prosperity and Others

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  • Kerry Liu

Abstract

In 2021, China launched a series of reform initiatives including common prosperity, a property tax, a regulatory crackdown on technology firms, a roadmap for peak carbon dioxide emissions and carbon neutrality and other policies aiming to improve people's lives. This study reviews each of them and finds that they are centred around common prosperity and guiding resource allocation. Based on Google Trends search results, this study creatively created a series of common prosperity policy indices, showing that China in 2021 may have experienced the most important policy shift since at least 2004. Based on EGARCH and ARDL models, this study finds that the whole economy, proxied by two popular composite indices, i.e. the Shanghai Stock Exchange Composite Index and the China Securities Index 300, responded positively to the common prosperity policy. Stock market responses also show that China's policies have successfully guided the resource allocation from the soft technology sector to the hard technology one. This study also discusses the broad implications, such as the role of the government and the evolution of private ownership in the Chinese economy.

Suggested Citation

  • Kerry Liu, 2022. "China's Reform Spree in 2021: Common Prosperity and Others," Economic Papers, The Economic Society of Australia, vol. 41(3), pages 232-246, September.
    • Handle: RePEc:bla:econpa:v:41:y:2022:i:3:p:232-246
    DOI: 10.1111/1759-3441.12365
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    References listed on IDEAS

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    Cited by:

    1. Kerry Liu, 2023. "America's decoupling from China: A perspective from stock markets," Economic Affairs, Wiley Blackwell, vol. 43(1), pages 32-52, February.

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