In-depth understanding of the relationship between expanding domestic demand and promoting common prosperity, and realizing the efficient coordination of the two strategies are important guarantees for constructing a new development pattern and accelerating socialist modernization.

Intrinsic logic

Firstly, expanding domestic demand provides sustained momentum for high-quality economic development. Expanding domestic demand, leveraging the advantages of a super large-scale domestic market, stimulating potential domestic demand, and raising the level of domestic demand are the strategic bases for fostering the new development pattern.

Secondly, high-quality economic development provides sufficient material conditions for common prosperity. Expanding domestic demand can provide new driving forces for high-quality economic development, creating more material wealth and thereby promoting common prosperity.

Finally, common prosperity provides intrinsic momentum and direction for expanding domestic demand. Promoting common prosperity can effectively expand the market’s consumption scale and promote the recirculation of social production. Furthermore, the pursuit of common prosperity will increase requirements for investments by both the government and enterprises.

Realization path

Achieving strategic synergy between expanding domestic demand and promoting common prosperity depends on a balanced economic ecosystem comprised of economic institutions, economic activities, and market entities. It also depends on the effective integration of production, distribution, circulation, and consumption to produce a national economic virtuous circulation.

First, maintaining sustained economic growth can provide a material foundation for the expansion of domestic demand and increased common prosperity. Second, structural optimization of income distribution can bridge domestic demand expansion and common prosperity. Third, government functions should be adapted to provide public security for domestic demand expansion and common prosperity. Fourth, the circulation of production factors should be promoted to provide a unified national market that can support domestic demand expansion and common prosperity. Fifth, the responsibility of micro entities to inject sufficient vitality for the expansion of domestic demand and common prosperity should be actualized.

Policy choices

Achieving the strategic coordination of domestic demand expansion and common prosperity requires upholding systematic concepts and observing market-oriented principles based on the rule of law to carry out top-level design of institutional policy systems.

In terms of fiscal and tax policies, the role of finance as the foundation and pillar of national governance should be fully leveraged. To ensure the sustainability of local financial systems, further tax reform should be prioritized, the transfer payments system improved, and government investment and debt management systems optimized. Based on the summarization of previous experience of tax and fee reduction, standardization and normalization of tax and fee reduction mechanisms should be explored. The equalization of basic public services should be promoted. A rational, scientific decision-making mechanism for government investments should be established and the performance evaluation of fund use strengthened.

While effectively controlling inflation, monetary and financial policies should permit a reasonable growth rate of the money supply to provide financial support for expanding domestic demand. Meanwhile, structural monetary policy tools should be innovated and deployed to improve the accuracy of monetary policy. The integrated development of digital finance, financial technologies, and inclusive finance should be promoted to enhance monetary policy tools and expand the coverage of financial services for vulnerable groups. The relationship between financial deepening and financial security should be balanced, and the level of financial supervision comprehensively improved. Fiscal and financial coordination should be strengthened to jointly help expand domestic demand and promote common prosperity.

From an industrial perspective, the use of industrial and competition policy should take a balanced approach. The expansion of domestic demand and supply-side structural reform should be organically combined, and the development of high-tech and low-carbon industries prioritized to achieve mutual promotion between supply and demand. Meanwhile, the principle of competition neutrality should be upheld to ensure that all types of market entities have equal opportunities. In the short term, industrial policies can be combined with consumer subsidies and other policies to stimulate domestic demand. In the long term, market-oriented means should be adopted to efficiently guide the allocation of social resources. The principle of competition neutrality should be combined with anti-monopoly policies to stimulate investment and innovation by small and medium enterprises.

Liu Hao is an associate professor from the School of Finance and Trade at Wenzhou Business College. Chen Gong is a professor from the School of Economics at Xiamen University.