General Secretary Xi Jinping has pointed out the necessity of adhering to the people-centered development philosophy, promoting common prosperity in the course of high-quality development, correctly handling the relationship between efficiency and fairness, and constructing a fundamental institutional arrangement that coordinates primary distribution, redistribution, and tertiary distribution. Common prosperity is the essential requirement of socialism with Chinese characteristics. The report to the 20th National Congress of the Communist Party of China (CPC) emphasized the need to solidly promote common prosperity, improve the distribution system, and build an institutional framework in which primary distribution, redistribution, and tertiary distribution are coordinated and complementary. The Recommendations of the Central Committee of the Communist Party of China for Formulating the 15th Five-Year Plan for National Economic and Social Development (hereinafter referred to as the Recommendations), deliberated and adopted by the Fourth Plenary Session of the 20th CPC Central Committee, explicitly sets “synchronizing the growth of resident income with economic growth, and synchronizing the increase in labor remuneration with the increase in labor productivity” as one of the main goals for economic and social development during the “15th Five-Year Plan” period. It also emphasizes the perfection of the income distribution system. We must adhere to the system where distribution according to work is the mainstay while multiple forms of distribution coexist, increase the share of resident income in national income distribution, and increase the share of labor remuneration in primary distribution. It is essential to improve the primary distribution mechanism where various factors of production are evaluated by the market and remuneration is determined by contribution, ensuring that those who work more earn more, those with high skills earn more, and innovators earn more.
As the foundation of the social distribution system, primary distribution is mainly formed within market mechanisms. Adhering to the basic distribution system — with distribution according to work as the mainstay and multiple forms of distribution coexisting — while insisting on more pay for more work and promoting equality of opportunity, constitutes the fundamental pathway to achieving common prosperity. In primary distribution, enterprises act as the main subjects of distribution, allocating national income among the state, the enterprise, and the laborers. As the primary source of income for laborers, if labor remuneration is suppressed, it will directly affect the quality of economic growth and lead to a series of economic imbalances, such as a decline in the labor income share, the growth of labor remuneration lagging behind the growth of labor productivity, the rate of employment growth falling behind the rate of economic growth, and a decline in the share of consumption in GDP. Imbalances in national income distribution may also exacerbate labor-capital conflicts and income inequality, becoming potential factors detrimental to social stability. Therefore, the Party Central Committee has historically attached great importance to primary income distribution, repeatedly emphasizing the need to adhere to the principle of distribution according to work, improve the mechanism whereby factors of production participate in primary distribution according to their contribution, increase the weight of labor remuneration in primary distribution, and realize the synchronous growth of labor productivity and labor remuneration. At the same time, it is necessary to regulate and guide the healthy development of capital.
In recent years, a decline in labor income share and wage stagnation, along with a relatively low proportion of labor remuneration in primary distribution, have become widespread phenomena worldwide. A significant reason for this lies in the existence of two types of market monopolies.
The first type involves monopoly in the product market. Typically, if a market consists of a large number of buyers and sellers, where no single party has the ability to influence market prices, such a market resembles a market of “perfect competition”. As Marx pointed out in Capital, enterprises use factors of production such as capital, labor, and land to manufacture products and pay remuneration to each factor based on the calculated added contribution to total output. In this process, capital receives interest (or profit), laborers receive wages, and land receives rent; these earnings are returns on their respective contributions to production, constituting “distribution according to the contribution of production factors”. At this point, if there is no monopoly in the factor market either, the market will not yield long-term positive economic profits. However, if the market consists of a large number of dispersed buyers but only a few or even a single seller, then according to political economic analysis, the seller can set prices exceeding the value of the products. In this scenario, the market exhibits forms of oligopoly or monopoly, where prices temporarily deviate upwards from value, allowing the seller to obtain excess profits.
The second type of monopoly stems from the labor monopsony market formed by super-large enterprises. Even in the absence of the aforementioned “seller’s monopoly” in the product market, reality dictates that factors such as excessive market concentration, information asymmetry, and search costs lead to so-called market “structural friction”. In this case, due to the monopolistic nature of the labor market (monopsony), the market cannot determine remuneration based on labor’s market contribution; the value created by the supply side of labor exceeds the wage level offered by the demand side.
Since the 18th National Congress of the CPC, China has continuously strengthened the importance and protection of laborers’ rights and interests, promoted fair competition, strived to cultivate a market of perfect competition, and built a unified national market. Simultaneously, by continuously raising minimum wage standards and strengthening trade union construction, the level of wage markdown has been continuously reduced, and the share of labor income in GDP has risen synchronously, gradually improving the phenomenon of “strong capital, weak labor”. The Fourth Plenary Session of the 19th CPC Central Committee elevated “distribution according to work as the mainstay with multiple forms of distribution coexisting” to the status of a basic socialist economic system, reflecting the dialectical unity of production and distribution. Production determines distribution, and distribution is a reflection of production. The ownership structure with “public ownership as the mainstay” determines the distribution system with “distribution according to work as the mainstay”; “the joint development of multiple forms of ownership economy” determines “multiple forms of distribution” involving the joint participation of labor, capital, land, knowledge, technology, management, and data.
In a situation where multiple factors participate in production and distribution, generally speaking, non-labor factors of production possess stronger bargaining power than labor factors. This is also why the Recommendations places the remuneration of laborers in a more important position. If non-labor production factors dominate labor relations — meaning the market power of enterprises is stronger — laborers’ remuneration will be lower than their contribution to the production process, leading to insufficient effective consumer demand and a decline in production enthusiasm. Conversely, if laborers dominate labor relations — meaning the market power of laborers is stronger — it may lead to “wages eroding profits”, affecting investment and the expansion of social reproduction, which is detrimental to improving production technology and fostering innovation, and also unhelpful for laborers to share the dividends of labor productivity growth. Therefore, this requires that distribution between labor and capital strikes a balance between expanding the scale of investment and safeguarding laborers’ rights and interests; that is, giving consideration to both fairness and efficiency in primary distribution. On one hand, we must mobilize the production enthusiasm and subjective initiative of laborers, while expanding domestic demand and promoting consumption by increasing laborers’ income; on the other hand, we must fully stimulate the vitality of various business entities, incentivizing owners of non-labor production factors to invest various elements into production, thereby driving the development of productive forces. This is consistent with the emphasis in the Recommendations to “adhere to expanding domestic demand as a strategic basis, adhere to the close combination of benefiting people’s livelihood and promoting consumption, and of investing in physical assets (‘investing in things’) and investing in people, using new demand to lead new supply and new supply to create new demand, promoting a benign interaction between consumption and investment, and between supply and demand, thereby enhancing the endogenous dynamics and reliability of domestic circulation”.
So, how can we better realize the “close combination of investing in physical assets and investing in people”? For a long time, we have continuously increased investment in various means of production. Although the total contribution of “investing in things” to the economy is still increasing, its marginal contribution is objectively declining. The urgent task now is to increase “investment in people”. Only in this way can we truly achieve the close combination of investing in things and investing in people, realizing the maximization of production output value. The essence of “investing in people” lies in promoting the integration of education, science and technology, and talent. Only through long-term, continuous investment in education — including both school education and on-the-job training — can we cultivate talent with high skills and deep expertise, realize a higher level of human capital, promote a substantial increase in labor productivity and innovation in product processes, and compensate for the possible decline in the marginal contribution of other non-labor factors by elevating the marginal contribution of labor, ultimately realizing the maximization of the output value of means of production.
It needs to be pointed out that applying Marxist political economy to guide China’s primary distribution relations requires, on one hand, increasing labor income and strengthening macro-guidance on enterprise wage distribution so that labor remuneration adapts to labor’s contribution to production. This complements the efforts to ameliorate buyer monopolies in the labor market and balance the market power of labor and capital. On the other hand, it is also necessary to increase laborers’ income through multiple channels, such as increasing the property income of urban and rural residents.
In conclusion, the basic economic system of the primary stage of socialism in China” — adhering to public ownership as the mainstay with multiple forms of ownership economy developing together, and distribution according to work as the mainstay with multiple forms of distribution coexisting” — is based on China’s national conditions and specific development practices. It constitutes a great practice of adapting Marxism to the Chinese context. We must, through the continuous improvement of the income distribution system, respect the dominant status of the people, and ensure that the achievements of modernization benefit all people more substantially and fairly.
Source: Study Times, January 12, 2026
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