Why markets are closely following Beijing’s response to the Evergrande crisis

The restructuring prospects for one of China’s largest property developers coincide with Beijing’s “common prosperity” initiative, highlighting the challenge policymakers face to lift social harmony without derailing the economy.

The year of 2021 is symbolically important for Beijing as it celebrates the centennial anniversary of the foundation of its Communist Party of China CCP. But amid a backdrop where global uncertainty persists, President Xi has echoed his ambition to promote social harmony, pursuing the nation’s “common prosperity” initiative, a party pledge from the days of Mao Zedong that strives to improve living standards and extends support for the CCP.

While few have defined exactly what China’s “common prosperity” notion entails, subsequent policy actions ossify the campaign as one that aims to create a fairer and more equitable society. This promise has permeated into key sectors of the...

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