Wang Yang: The responsibilities and responsibilities of financial institutions in the context of promoting common prosperity

On August 17, 2021, the 10th meeting of the Central Financial and Economic Commission was held in Beijing, focusing on the issue of solidly promoting common prosperity. Promoting common prosperity is an important part of adhering to the people-centered and continuously consolidating the foundation of people's livelihood, and it is also the essential requirement of socialism, this conference provides the underlying policy logic for China's development in the next decade, which is related to the well-being of people's livelihood and the long-term stability of the country, and will also have a profound impact on the family wealth management of high-net-worth customers and even the entire financial institutions.

I. Policy Interpretation on the Issue of Promoting Common Prosperity

(1) The central level sets the basic tone for common prosperity

The Tenth Meeting of the Central Financial and Economic Commission pointed out that after the reform and opening up, our party profoundly summed up the positive and negative historical experiences, realized that poverty is not socialism, broke the shackles of the traditional system, allowed some people and some regions to get rich first, and promoted the liberation and development of social productive forces.

Since the Eighteenth National Congress of the Communist Party of China, the Party Central Committee has placed the gradual realization of common prosperity for all the people in a more important position, taken effective measures to ensure and improve people's livelihood, won the battle against poverty, and built a moderately prosperous society in an all-round way, thus creating good conditions for promoting common prosperity.

China's wealth distribution has also gone through three stages with the development of national society, namely, the "big pot rice" egalitarianism after the founding of the People's Republic of China to 1978, the efficiency priority and fairness of "letting some people get rich first" from 1978 to 2020, and then the common prosperity under the current goal of "building a well-off life in an all-round way", which is the focus of efforts for the people's happiness.

(2) A road map for achieving common prosperity

The meeting proposed that it is necessary to adhere to the people-centered development thinking, promote common prosperity in high-quality development, correctly handle the relationship between efficiency and fairness, build a basic institutional arrangement for the coordination of primary distribution, redistribution, and tertiary distribution, increase the intensity of taxation, social security, transfer payments, etc. and improve precision, expand the proportion of middle-income groups, increase the income of low-income groups, rationally adjust high incomes, ban illegal incomes, form an olive-shaped distribution structure with large middle and small ends, and promote social fairness and justice. Promote the all-round development of the human person and enable all the people to make solid progress towards the goal of common prosperity.

To achieve common prosperity under the path of "three distributions", one is to give play to the role of the market and distribute according to the factors of production, which is a matter of efficiency; the second is to give play to the role of the government, improve the secondary distribution, and strengthen the adjustment of income, which is a matter of fairness; the third is to give play to the role of individuals and promote charitable donations, which involves the rebalancing of fairness and efficiency.

(III) The starting point for achieving common prosperity: to create fair development opportunities for more people

The meeting pointed out that common prosperity is the prosperity of the entire people, the prosperity of the masses of the people in both the material and spiritual lives, not the prosperity of a small number of people, nor the uniform egalitarianism, and it is necessary to promote common prosperity in stages. It is necessary to encourage hard work, innovation, and prosperity, persist in guaranteeing and improving people's livelihood in the course of development, improve the people's education level, enhance their ability to develop, create more inclusive and fair conditions, smooth upward mobility channels, create opportunities for more people to get rich, and form a development environment in which everyone participates.

In recent years, with the rapid development of the economy, the income level has been greatly improved, and the income distribution has also been significantly improved, but the difference in wealth accumulation is more obvious, the gap between the rich and the poor has gradually widened, and the real problem directly caused by the solidification of social classes, the closure of the upward channel, the rich have more privileges, the monopoly industry uses the disorderly expansion of capital, and the middle class has anxiety, young people choose to "lie flat", inner volume education gives birth to "chicken babies", and social injustice reduces the happiness of ordinary people. Therefore, at present, more emphasis is on the equality of wealth and the fairness of opportunities, and all things that seriously undermine fairness and justice must be corrected in a timely manner.

(4) Thoroughly solve the problem of "new three mountains" in the field of people's livelihood, and do a good job of supporting the bottom

Common prosperity is common prosperity in a step-by-step and phased manner, not uniform egalitarianism, and the key role of the state in it is to improve and create fair development conditions for the people to achieve common prosperity, and the other is to support the bottom, to do a good job in ensuring people's livelihood, to be a strong backing for the common prosperity of all the people, and to strengthen the construction of basic, inclusive, and bottom-up people's livelihood security. The meeting pointed out that it is necessary to promote the equalization of basic public services, increase inclusive human capital investment, and improve the old-age and medical security system, the bottom-up assistance system, the housing supply and security system.

Education, health care and housing are the "new three mountains" that affect common prosperity, and behind this there is actually the shadow of capital making waves. It can be said that the cross-border penetration of capital is the great enemy of common prosperity. Only by thoroughly solving the problems of people's livelihood and improving people's livelihood and well-being can we reduce the economic burden of the people, solve the people's worries, alleviate the people's social anxiety, overthrow the "new three mountains", make social distribution more fair and reasonable, let the bottom guarantee policy be accurate, and let the people have more sense of gain and happiness.

Second, the potential impact of promoting common prosperity on high-net-worth customers

(1) The income of high-net-worth customers will be more transparent

In the future, it is necessary to strengthen the regulation and adjustment of high incomes, protect legal incomes according to law, and rationally adjust excessively high incomes. It is necessary to sort out and standardize unreasonable income, straighten out the order of income distribution, and resolutely ban illegal income. Therefore, the income gap between different industries will be narrowed, the income gap between different production factors will be balanced, and the income of high-net-worth customers will be regulated and regulated.

The so-called unreasonable income mainly refers to the income obtained by monopoly industries, such as high income obtained by capital-driven income, which is extremely mismatched with payment, or involves high-net-worth customers such as corporate executives, capital speculators, and entertainers; illegal income refers to illegal income under the conditions prescribed by law, such as tax evasion income, power rent-seeking income, corruption income, illegal fund-raising income, etc.

In the past period of time, many private entrepreneurs in the process of making a fortune there is "original sin", some business owners in the public to private aspects of the existence of nominal borrowing, current payments and other ways to evade tax payment, and some people through capital speculation to get rich, these illegal practices will face severe penalties in the future, it is foreseeable that the future for high-net-worth customers' income source audit and tax verification will be more stringent, high-net-worth customers' wealth will be placed under the sun.

(2) High-net-worth customers will become the targets of key tax supervision

During the "14th Five-Year Plan" period, China should establish and improve a tax system that is conducive to high-quality development, social fairness and market unification, optimize the tax structure, improve the efficiency of tax collection and management, improve the direct tax system, and gradually increase the proportion of direct taxes. In the context of promoting common prosperity, tax policies will inevitably be targeted and precise, and high-net-worth customers will inevitably become the focus of the tax department.

Recently, the Inspection Bureau of the State Administration of Taxation said that the tax inspection department is filing a case for individual people who conceal high income and do not truthfully declare and pay taxes. As the main means of secondary distribution and adjustment of income, taxation will be further improved in the context of the era of promoting common prosperity, especially for individual income tax. Family wealth management in the new tax era is bound to be accompanied by three major trends: deepening tax reform, strict tax collection and management, and personalizing tax inspection directions. With the launch of the fourth phase of the Golden Tax, with the establishment of the tax identification number for natural persons, the introduction of anti-tax avoidance clauses for the first time in the new personal income tax and the exchange of CRS tax information, the domestic and foreign wealth and revenue of high-net-worth customers will be more transparent, and the role of tax regulation of wealth and income will be further enhanced, in order to better achieve the goal of promoting common prosperity. It is expected that the state will start from the two aspects of property and income, improve the tax policy, give play to the role of tax revenue redistribution, and lay the foundation for the three distributions. In terms of property taxation, property tax, inheritance tax (gift tax), and capital gains tax are getting closer and closer; in terms of income taxation, it is expected that personal income tax will face adjustment and improvement again.

(3) The path of high-net-worth customers to create wealth changes, and it is necessary to do something and do nothing

Some analysts pointed out that the reason for the gap between the rich and the poor lies in industrial changes, excessive rise in asset prices and technological progress, and the problem of the gap between the rich and the poor is the problem of capital logic. If capital is not put into the cage of the system and expanded from the economic field to the people's livelihood field, the social field and the political field, it will shake the foundation of common prosperity, shake the foundation of the national economy and people's livelihood, and cause unfairness and disharmony in the whole society.

From the anti-monopoly of the platform economy to the standardization and rectification of the education industry under the "double reduction" policy, and then to the clear action of the entertainment industry to combat the "rice circle" culture, all of them reveal an important signal, that is, a series of industries that have relinquished and reshaped the rapid development of capital in the past are facing reshuffle and reshaping, and the deeper logic behind it is to prevent the disorderly expansion of capital, narrow the gap between rich and poor brought about by the industry, strengthen the coordination of industry development, reduce the economic burden of ordinary people, promote social fairness and justice, and let capital play a role within the framework of the law. Serve entities and promote common prosperity.

For high-net-worth customers, the end of the old cycle means that the original practices and experiences cannot be simply copied again, the new era has new dividends, the path for high-net-worth customers to create wealth will undergo profound changes, gentlemen love money, have a way to get it, it is important to have a sense of awe, do not rub the edge, put an end to gray income, resist illegal income. In the face of the new era background, high-net-worth customers should always adhere to the bottom line thinking, do not touch the red line of the system, many industries are undergoing reshuffle and reshaping, so high-net-worth customers should choose the right industry, do the right thing, but also do a good job of risk protection and wealth isolation, carefully sort out and plan the wealth they hold, and re-examine, adjust and improve the family business governance and family wealth governance structure.

(4) The investment ideas of high-net-worth customers are facing profound adjustments

The meeting mentioned the housing supply and security system, mainly referring to the strengthening of the supply of affordable housing (affordable rental housing, public rental housing and co-ownership housing, etc.), the purpose of which is to solve the housing problem, improve the housing security system, and strive to achieve housing for all people, so the policy of not speculating in housing will continue. In 2016, the Central Economic Work Conference first proposed that "housing is not speculated", and since then, the relevant departments have successively introduced relevant supporting policies such as purchase restrictions, second-hand housing guidance prices, and restrictions on the flow of funds into real estate. For a long time, domestic high-net-worth customers are biased towards real estate investment, and because they have hitched a ride on the express train of the golden decade of real estate and achieved rapid growth in wealth, however, with the changes in national policies and macro environment, the wealth effect brought about by the rapid development of China's real estate market will disappear, the asset class of high-net-worth customers will change from traditional real estate to more diversified asset classes and comprehensive service needs, equity assets may become a new reservoir of resident wealth, and the investment ideas of high-net-worth customers need to be transformed urgently. At present, China's wealth distribution has entered a new era, and the family wealth of high-net-worth customers is also accelerating into the next allocation inflection point.

(v) Common tools for family wealth management will face major changes

In the future, in determining the distribution of income returns by various factors of production, the rate of return on the contribution of labor factors may be improved, the rate of return on the contribution of capital factors will be adjusted, and the rate of return between various factors of production will be balanced, so the capital gains generated by the use of various types of investment and financial management tools will be strictly supervised and included in the scope of tax collection and management.

For high-net-worth customers often use large-value insurance policies, family trusts and other wealth inheritance tools, the future of the customer's source of funds legality review will be more stringent, the tax planning space of inheritance tools will become smaller, family trusts may have clear term limits, trust property investment income tax issues will be clarified, family offices will also adopt a licensed operation model, for family wealth management practitioners, it is both a challenge and an opportunity.

Third, the responsibilities and responsibilities of financial institutions in promoting common prosperity

(1) Give play to the role of financial support entities to help high-quality economic and social development

Eliminating poverty, improving people's livelihood, and gradually realizing the common prosperity of all the people are the essential requirements of socialism. At present, Chinese society is fully embarking on a new journey of comprehensively building a modern socialist country, taking the promotion of common prosperity as the focus of "seeking happiness for the people", adhering to the people-centered approach, promoting high-quality development, and constantly making a big share of the "cake" of common prosperity. To achieve common prosperity, we must first do a good job and make the "cake" bigger, and then how to divide the "cake", so "wealth" is the premise and foundation for achieving common prosperity, without the strength of the economy, there will be no realization of common prosperity, and promoting high-quality economic development is the meaning of the topic of promoting the realization of common prosperity. By 2025, China's total economic volume should reach the current high-income national standard, and by 2035, the total economic volume or per capita income should be doubled, so financial institutions should focus on the development of productive forces in the context of policies to promote common prosperity, increase financial support for strategic emerging industries and people's livelihood security industries, and help achieve a new development pattern with the domestic cycle as the main body and the domestic and international dual cycles promoting each other.

As a financial institution, we should continue to deepen financial reform, strengthen support for the real economy, solve the problem of "difficult and expensive financing" for enterprises, broaden the financing channels of enterprises, reduce the financing costs of enterprises, promote the expansion of reproduction of enterprises, guide the flow of funds to the weak links of economic development, and then narrow the development gap between regions and lay the foundation for common prosperity. In terms of financial innovation, financial institutions should focus on inclusive finance, green finance, pension finance, "three rural" finance and digital finance, pay more attention to the service needs of low-income groups and middle-income groups, and let more audiences enjoy the fruits of economic and social development through financial services, and open up the last mile of financial services.

(2) Give full play to the advantages of financial institutions in wealth management and increase the property income of residents

The meeting pointed out that efforts should be made to expand the scale of middle-income groups, grasp the key points, and accurately implement policies to promote more low-income people to enter the ranks of middle-income. Increasing residents' income mainly starts from two aspects: labor income and property income:

It is expected that in the future, the state will further optimize and improve the distribution mechanism of production factors, pay more attention to the distribution of labor factors in the primary distribution, improve the income return of labor factors, improve the mechanism of labor participation in distribution, persist in working more and getting more, working less and getting less, and not working hard, so that different types and different intensities of labor can get different labor remuneration, increase the proportion of labor remuneration in the primary distribution, and consolidate the main position of distribution according to work. At the same time, the state will also explore the establishment of a long-term mechanism for stable poverty alleviation in the secondary distribution of low-income groups in poor areas, rural areas and remote areas, so as to achieve rural revitalization, so that low-income groups can enter the ranks of middle-income, and then promote the realization of common prosperity.

For increasing the property income of residents, financial institutions can make great achievements, the experience of developed countries shows that after the per capita GDP exceeds 2000 US dollars, property income will become one of the important sources of resident income, the united States resident property income in 2018 accounted for more than 40%, and the property income of Chinese residents is still relatively low. Financial institutions should strengthen the sinking of financial services, improve the breadth of financial services, use online and offline channels, give play to the efficiency of digital finance and inclusive finance, bring more convenient and efficient financial services to low- and middle-income groups, establish a good awareness of residents' investment and financial management, and at the same time strengthen market research and product innovation, provide middle- and low-income groups with more abundant investment and financial products and services with different risk levels, and realize the transformation from product sales to wealth management to investment consultants. Give full play to the significant advantages of financial institutions in wealth management, and become the main channel for residents to increase property income.

(III) Financial institutions should strengthen investment and research capabilities in beneficiary industries and increase product innovation output

Promoting common prosperity will inevitably bring about the growth of residents' income and the improvement of consumption capacity, light industry, textile and clothing, daily necessities, food and beverages and other must-choose consumer goods industry will usher in iterative upgrading, home appliances, automobiles, leisure, media and other optional consumer goods industry will flourish, at the same time, the meeting emphasized that common prosperity is the people's material life and spiritual life double prosperity, so spiritual and cultural consumption may rise. According to the Japanese consumption expert Miura In the "Fourth Consumption Era", with the expansion of the middle class, Japan entered the third consumption era in the 1970s, and one of the typical characteristics of this era is to shift from material consumption to spiritual consumption, and the consumption of culture, entertainment, tourism, sports and other categories began to grow rapidly. Therefore, financial institutions should seize the industry opportunities in the context of promoting the era of common prosperity, strengthen investment and research capacity building in related fields, conform to the trend of the times, seize the opportunities of the times, do a good job in product innovation output, and launch funds and wealth management products with related themes to better meet the investment and financial needs of residents.

(4) Pay attention to vulnerable groups and launch more warm exclusive services for vulnerable groups

With the continuous implementation of the policy of promoting common prosperity, the state may introduce a series of new measures in terms of the minimum wage standard of workers and the protection of workers' rights and interests, especially the vast number of farmers, migrant workers and urban wage earners and other front-line workers will benefit. The transformation from a pyramid-type distribution structure to an olive-shaped distribution structure can be summarized as a step-by-step realization of common prosperity through "raising, expanding, raising, and cracking down on non-proliferation", and financial institutions can also launch exclusive financial services to help vulnerable groups such as middle and low incomes, and explore guarantee-type trusts such as migrant workers' wage protection trusts, disabled people's care trusts, and elderly pension trusts to achieve the accuracy of financial services.

(5) In the management of family wealth, it is necessary to show goodness and beauty and promote common prosperity

To promote common prosperity, we must not only play the main role of the government, but also give play to the main role of individuals, that is, to encourage more high-income groups to give back to the society through charitable donations. At present, many high-net-worth customers in China, especially some entrepreneurs, have gradually actively engaged in public welfare, but this is still far from The total economic volume of our country. According to statistics, in 2019, Chinese mainland received only 0.15% of GDP; in the United States, this value accounted for about 2.1% of the GDP of the United States that year. In the third distribution, it is mainly to actively guide and encourage high-income groups and entrepreneurs to adjust the distribution of social income through voluntary means such as charity and donation, actively return to society, and practice social responsibility, and the state will also improve the incentive and tax reduction policies for charitable donations, achieve positive circulation, and encourage more high-income people to voluntarily participate in charitable public welfare undertakings. The inheritance of high-net-worth customers should not only be material wealth, but also include time-honored responsibility, family spirit and family feelings. Throughout the ancient and modern China and abroad, high-net-worth customers, ultra-high-net-worth customers as the owner of wealth, should have more social responsibility and the times to bear, wealth return to society, charity to give back to society is the value of family wealth management and ultimate significance, and in this process, charitable foundations, charitable trusts as a new type of charity tool to promote common prosperity, can not be underestimated, promising, can better reflect the high-net-worth customers' charitable donation willingness and original intention, become a new trend in the development of family charity in the future. Financial institutions should also seize the opportunity of the development of philanthropic finance and contribute to the promotion of common prosperity.

About the author: Wang Yang, working in the Wealth Management and Private Banking Department of Bank of Beijing, has been engaged in family wealth management for a long time, and has won the top ten players in the wealth value track of the 2016 Global Chinese Innovation and Entrepreneurship Competition of the International Wealth Management Standards Development Committee, the gold award of the 2019 China Private Banking Elite Competition, the outstanding investment consultant of the 2019 Asia-Pacific Wealth Forum Golden Zhen Award, and the best wealth manager of Wasion College in 2019, etc. The article only represents personal views.

This article originated from the Financial Circle Network