MIDDLE CLASS IN CHINA
Chinese are living better overall: consuming more food, energy and goods than ever. One-fourth of the population — the equivalent of everyone in the United States — has entered the middle class. Definitions of middle class vary. One marker is an income above $10,000. Others say it is a household that owns an apartment and a car, has enough money to eats out and take vacations and is familiar with foreign brands and ideas. Source: Kenneth R. Weiss, Los Angeles Times, July 22, 2012]
Some estimate there are about 400 million members of the middle class in China. But according to Boston Consulting Group the population of “middle and affluent consumers” (or MACs) in China was 12 million people in 2017, or about 7 percent of the population, compared to 21 percent in Vietnam and 38 percent in Indonesia. [Source: Boston Consulting Group (BCG), ICEF Monitor, February 27, 2017]
The Chinese middle class is comprised of businessmen, writers, doctors, lawyers, employees of foreign companies, professionals, entrepreneurs, artists and intellectuals. Many of these people openly label themselves as middle class. This is a far cry from the old days when being labeled bourgeois was one of the worst things that someone could be called. A large chunk of the middle class is made of government workers who continue to make comfortable salaries and receive various perks such as subsidized apartments or houses, which they pay very little for. The money they earn is either saved or spent on things like televisions, household appliances and education for their children. A car or an overseas vacation would eat a large share of their income. Some government workers supplement their income with bribes, “fees” or hurry up money.
The Communist party has given its tacit approval to the emerging middle class as a positive aspect of modernization. Some outsiders see the creation of a middle class as a key step towards creating a democracy. But that seems more and more unlikely under Xi Jinping. The Chinese middle class perhaps has been the greatest beneficiary of China’s economic boom. Francis Fukuyama, professor of international studies at Johns Hopkins, wrote in the Japanese newspaper the Daily Yomiuri, In the years since Tiananmen Square, “the Chinese middle class has been largely coopted by the regime, which allowed it to expand and get rich with extraordinary speed.”
See Separate Articles: MIDDLE CLASS LIFE IN CHINA factsanddetails.com ; CHILDREN IN CHINA factsanddetails.com ; CHILD REARING IN CHINA factsanddetails.com ; LITTLE EMPERORS AND MIDDLE CLASS KIDS IN CHINA factsanddetails.com ; ONE-CHILD POLICY factsanddetails.com ; FAMILIES IN CHINA factsanddetails.com ; SINGLE ADULTS AND LEFTOVER WOMEN IN CHINA factsanddetails.com ; SINGLE MOTHERS, MARRIED WITH NO CHILDREN IN CHINA factsanddetails.com ; CHINESE WOMEN factsanddetails.com ; HUAXI, CHINA'S RICHEST VILLAGE factsanddetails.com ; CHINESE SOCIETY factsanddetails.com ; Who Are China’s Middle Class china.org ; Book: “Pianos and Politics in China” by Richard Curt Kraus is about middle-class cultural taste.
Chinese Middle Class Numbers
Zhou Xin wrote in the South China Morning Post: Estimates of the size of China’s middle class vary, depending on the definition. China’s statistics agency puts the figure at nearly 400 million, less than a third of the population, by defining a middle-class household as one making 25,000 yuan (US$3, 640) to 250,000 (US$36, 400) yuan a year — a fairly low threshold. But in a 2015 report, investment banking company UBS and PricewaterhouseCoopers narrowed it to 109 million Chinese with wealth of between US$50,000 and US$500,000-a relatively high standard. Whatever the measure, it is clear that China’s middle class is large in absolute terms but still relatively small as a share of China’s 1.4 billion people. In comparison, more than half the US population is considered middle class, while in South Korea it is two-thirds.[Source: Zhou Xin, South China Morning Post, October 12, 2018]
According to Chinascope: Well-known Chinese financial news media group Caixin reported that a 2017 professional social structure study called, “The Middle Class Transition Tier and The Edge Tier” found that 19.12 percent of China’s population is Middle Class. Of those, 73 percent are very close to the borderline that divides the Middle and the Lower classes. The study was based on a model established under the International Socio-Economic Index of Occupational Status (ISEI). The sample size was 683,291 employed people who are between the ages of 16 and 64. In addition to the Middle Class, China has an Upper Class of 5.62 percent of the population and a Lower Class of 75.25 percent. In the Lower Class, 4.4 percent (of the entire Chinese population) was in the “Transition Tier” that is very close to the Middle Class line, and in the Middle Class, 13.9 percent was in the “Edge Tier” that’s slightly above the same dividing line. The entire population’s 13.9 percent is 73 percent of the Middle Class population. The study also found that the bigger a city is, the more people are in the Middle Class Edge Tier. In cities with more than 10 million residents, 25.35 percent of the city’s population is in the Middle Class Edge Tier. [Source:Chinascope, April 17, 2017; Caixin April 17, 2017]
Growth of the Chinese Middle Class
The Chinese middle class has grown at phenomenal rate since the end of the Mao era. The group didn't even exist in the 1970s and now it is comprised of 64 million people, according to a MasterCard survey in 2002. In the survey middle class was defined as a household earning more than $5,000 a year, a level regarded as high enough to buy a car or think about purchasing an apartment in China. The middle class is expected to expand to 600 million by 2020.
In the early 2000s, some defined the middle class in China as people earning more than $3,000 a year. As of 2002, there were around 100 million Chinese who fit this description and their numbers were increasing at a rate of about 20 percent a year. The income of the he top 10 percent of urban dweller rose from around $1,200 a year in 1995 to $4,600 in 2005. At that time less than 5 percent of the population earned that much and only 15 million made more than $32,000 a year. Roughly 500,000 Chinese earned $64,000 a year or more, but it was hard to say for sure because hard figures were hard to come by. Among those that fell into this group are top bureaucrats, factory managers and land developers.
A typical middle class couple in the mid 2000s was made up of an engineer husband and a wife that works in real estate. Together they earned $10,000 and live in a $37,000 condominium. Their wedding was at a nice hotel, including lunch for 150, cost $4,000. Their dream is to own a “really good car...within 10 years.” A middle class household in Shanghai at that time that earned $18,000 a year and lived in a three bedroom apartment, furnished with foreign brand-name furniture. They owned a Volkswagen Bora, ate out twice a week, used their air conditioner all summer and bought their 12-year-old daughter a $250 Panasonic cell phone.
A typical young, up-and-coming middle class woman in the mid 2000s worked as an editor for an entertainment weekly, earned about $1,000 a month, spent her free tine in shopping malls and trendy new restaurants and dreamed of owning a car and a house. People earning more than $32,000 a year can live in a nice suburban townhouse or home, vacation in Thailand or Europe and drive a Buick.
As of 2012 the Chinese upper middle class were defined by some as household earning between 100,000 and 300,000 yuan ($16,000 to $47,000) a year. At that time this segment of the population was growing by 28 percent a year. In 2017, China’s top leaders declared that China was the world’s largest “middle income group”, bigger than the entire population of United States. Per capita wealth has risen from US$156 in 1978 to over y US$10,000 in 2020. [Source: Kenneth R. Weiss, Los Angeles Times, July 22, 2012; Zhou Xin, South China Morning Post, October 12, 2018]
Upper Middle Class Groups in China
Angie Eagan and Rebecca Weiner wrote in “CultureShock! China”: Managers and Technocrats: Leading these offices and factories are a considerably more select group. These are the Chinese workers who have mastered not only technical and language skills, but also some of the ‘softer’ arts of business, from managing teams and negotiating deals to handling cross-cultural issues. Many of these are ‘returnees’, Chinese who have done stints of study or work abroad and are bringing their experience home. Others have worked their way up the ranks within Chinese or foreign-invested companies, learning firsthand how global business works. Many have also received coveted international assignments from previous employers and have a good sense of living standards abroad, which they seek to adopt at home. Such experienced managers are increasingly in short supply in China as more and more foreign companies crowd in, seeking the guidance of managers with both deep local knowledge and serious global exposure. [Source: “CultureShock! China: A Survival Guide to Customs and Etiquette” by Angie Eagan and Rebecca Weiner, Marshall Cavendish 2011]
As a result, middle-to-senior Chinese managers often command salaries much closer to those of their global peers than to salaries of other Chinese. They tend to have lifestyles that combine some of the best of the global and the local. And they tend to be very savvy in terms of managing their careers and planning for their children. Paralleling this successful managerial class in the business world are growing ranks of thoughtful administrators within the government, academia and the growing numbers of think-tanks in China. While China’s government is still far larger and more heavily staffed than those of most developed nations, it is continuing to shrink and becoming more efficient over time. And increasingly, it is staffed by sophisticated technocrats far less concerned than their forebears with issues of Party loyalty, and far more with performance that make China (and thus, yes, the Party) succeed. [Source: “CultureShock! China: A Survival Guide to Customs and Etiquette” by Angie Eagan and Rebecca Weiner, Marshall Cavendish 2011]
According to the “Worldmark Encyclopedia of National Economies” in the early 2000s, private businessmen and managers made up the core of the newly affluent. Others included Scientists who own patents, teachers who tutor privately, consultants, securities traders, entertainers and advertising executives. There were roughly 30 million Chinese in 2000 considered to be well off, which makes only a small fraction of China's population of 1.2 billion. Heavily concentrated in major cities such as Beijing and Shanghai, the affluent Chinese represented a newly emerging market for all sorts of luxuries. China counted on the desire of the well-to-do for better housing and consumer goods to help keep the economy growing. [Source: Robert Guang Tian and Camilla Hong Wang, “Worldmark Encyclopedia of National Economies”, Gale Group Inc., 2002]
Consumer Middle Class in China
Angie Eagan and Rebecca Weiner wrote in “CultureShock! China”: For China’s middle class, survival and basic personal security are pretty well given. They spend their days dealing with family and children, self-esteem and the esteem of others. This, of course, makes them perfect targets for marketing campaigns based on family happiness, health and closeness, as well as on individual and social esteem. Spend any time watching successful advertisements on Chinese television and you will see a range of familiar images from similar advertisements in the US: happy couples, smiling children, nice homes, or chic youngsters with chic friends. [Source: “CultureShock! China: A Survival Guide to Customs and Etiquette” by Angie Eagan and Rebecca Weiner, Marshall Cavendish 2011]
There is a clear sense that China’s middle class and elite audiences today, from a marketing perspective, are more than less similar to their Western counterparts. This represents a shift from earlier times.In the late 1970s and early 1980s, for instance, psychologist Edwin C Nevis did research in China suggesting that China’s intense group-orientation at the time (the tail-end of the Blue Ant era) meant that self-esteem for Chinese came not from individual but from group recognition. Even then, however, Nevis predicted that economic reform might shift China closer to the US in that regard, and that shift seems in fact to have largely taken place. Of course, beneath all these psychological and marketing complexities are an even more fundamental layer of values and philosophical ideals handed down from China’s very long and complex past.
Dahu (New Money People)
Chinese yuppies, known as “dahu” ("new money people") and to some as Chuppies, are very conspicuous in their clothes, habits and lifestyle. They include fashion designers, businessmen, nouveau riche farmers, traders, factory managers and skilled workers and are found mostly in Beijing, Shanghai, Guangzhou and Shenzhen. Describing this group in the early 2010s, Henry Chu wrote in the Los Angeles Times, "They are smart, confident, optimistic. They emphasize quality of life — and are increasingly able to pay for it. They work and socialize with like-minded people, forming loose networks with fellow travelers on the road to greater personal freedom and fulfillment." Chinese, who quit their secure government jobs and strike out on their own, are known as "Xia hai" (a term that means "plunge into the sea"). Busy career women who fall in to this category often say "I have no time to be married."
Dahu have a healthy appetite for household appliances, TVs and foreign products and are the market that many foreign companies hope to cash in on. Yuppies in Beijing drive Japanese cars, live in spacious suburban homes, dress in Chanel and Armani clothes, use cell phones, work out at the local gym, own microwave ovens and DVD players, vacation abroad, wear Prada and Gucci shoes and shop at IKEA.
A health survey of 20,000 Chinese white-collar workers by Microsoft web portal MSN, found that 80 percent of those surveyed had been depressed over the past six months. Six percent said they were in need of urgent help. One 30-year-old Chongqing professional told the Strait Times, “Because of the stress I face at work, I wake up earlier than a rooster and go to sleep later than a dog — making me zhu gou bu ru (“lowlier than a pig or dog”). In July 2009, a man who worked for cell phone maker Foxconn who killed himself by jumping off a building said he suffered from overwork. He had worked the previous three months without a day off. The same month an employee with the same company committed suicide after being accused of stealing an iPhone prototype.
To relieve the stress some young white-collar workers engage in pillow fights at local clubs and have formed nie nie zu (“pinch brigades”) that roam supermarkets shoplifting snacks, puncturing noodle packages and letting the fizz out of carbonated drinks. Workers with insomnia seek relief from Internet-recommended lullabies, binge eating or playing computers games in which they “steal vegetables” from virtual gardens.
New Working Class of China
Angie Eagan and Rebecca Weiner wrote in “CultureShock! China”: In China’s boomtowns, while the floating population handles bottom-tier jobs, official residents are moving quickly up the value chain in job skills and quality of life. In offices and factories owned by foreign-invested enterprises and by the better-run SOEs and private Chineseowned companies, new generation Chinese workers are learning skills their forebears never dreamed of. [Source: “CultureShock! China: A Survival Guide to Customs and Etiquette” by Angie Eagan and Rebecca Weiner, Marshall Cavendish 2011]
Many (especially among office workers) are fluent in English, German or Japanese. Many are computer whizzes, or expert technicians, or are familiar with every nuance of ISO 140001 environmental quality controls. Increasingly, these skills are commanding salaries their forebears never dreamed of either. This is the bulk of that 300million-strong middle class the UN writes about. Most live in decent apartments, with heaters, running hot water and other amenities their parents rarely and their grandparents never experienced. Ever-increasing numbers aspire to own their own apartments and cars.
The following are the "Three Most Desired Items" of each decade:
1970s: sewing machine, rice cooker, bicycle
1980s: colour tv, refrigerator, washing machine
1990s: private apartment, car, computer
2000s: luxury home, sports car, home entertainment system
Chinese Government and the Chinese Middle Class
Leo Lewis wrote in The Times, “Years of economic boom have given China a middle class that is quietly establishing a hefty political, social and economic importance. “In Beijing and in the senior ranks of the party the question of how to keep the middle class happy has even greater resonance. The party's success depends not just on expanding the middle class, but on ensuring it fuels consumption for decades to come. "There are some standards we meet and others we don't," said a mother grudgingly prepared to admit that her family qualifies as middle class. "It is a class that wants stability above everything, that would sell a kidney if it meant a better education for our daughter, and where I spend every day knowing I haven't saved enough for retirement." [Source: Leo Lewis, The Times, March 6, 2013]
Chris Buckley wrote in the New York Times’s Sinosphere: “The professionals, managers, white-collar workers and business owners who make up China’s middle class are a source of hope and anxiety for the nation’s leaders. If its numbers, incomes and satisfaction grow, this middle class could remain a stabilizing pillar of Communist Party governance. But if this wealthier, educated urban stratum becomes unhappy, then the party’s grip could weaken. [Source: Chris Buckley, Sinosphere, New York Times, January 27, 2016]
“For now, most members of the Chinese middle class appear attached, for the most part, to the status quo, the Peking University study suggests. The notion that wealthier urbanites are poised to challenge party rule appears unfounded, even taking into account that many people in China may be reluctant to criticize the government, even in surveys. The study found that about 60 percent of respondents who identified as belonging to the “upper middle stratum” of society had a positive view of their local government’s performance. By contrast, 48 percent of those who put themselves in the lowest stratum held a positive view.
““Compared to the working class, and especially workers in the state sector, China’s middle class has a more positive assessment of perceptions of the rich-poor gap, trustworthiness of officials and government performance, ” the study said. “The middle class has the potential to become a social stabilizer.”
“That could change. A separate survey of more than 3,000 people published by the Chinese Academy of Social Sciences found that middle-class Chinese are more politically engaged than other members of society. The survey, conducted across 12 months from late 2014 and published in the academy’s 2016 “blue book” of social issues, found that 42.6 percent of middle-class respondents in Beijing, Shanghai and Guangzhou said they discussed politics with those around them. Just 27.7 percent of people not in the middle class said they did so.
Has the Chinese Government Bought Off the Middle Class?
On the belief that China’s regime has bought off the middle class, Minxin Pei wrote in the Washington Post: Hardly. Three decades of double-digit economic growth has elevated about 250 to 300 million Chinese — mainly urban residents — to middle-class status. Since the regime crushed the Tiananmen democracy movement in 1989, the middle class has been busy pursuing wealth, not demanding political freedoms. But this does not mean this group has thrown its support behind the ruling party. There is a world of difference between political apathy and enduring loyalty. [Source: Minxin Pei, Washington Post, January 26, 2011;Minxin Pei, director of the Keck Center for International and Strategic Studies at Claremont McKenna College, is the author of “China’s Trapped Transition: The Limits of Developmental Autocracy.”]
At most, the Chinese middle class tolerates the status quo because it is a vast improvement over the totalitarian rule of the past — and because there is no practical or immediate alternative. But as the Arab Spring shows, a single event or a misstep by authoritarian rulers can transform apathetic middle-class citizens into radical revolutionaries.
That can happen even without a precipitating economic crisis. Today, China’s middle class is becoming more dissatisfied with inequality, corruption, unaffordable housing, pollution and poor services. In Shanghai a few years ago, thousands of middle-class citizens staged a “collective walk” and stopped a planned train extension, a project that threatened their home values. A similar demonstration last year in Dalian resulted in the shutdown of a polluting petrochemical plant. The party knows it cannot bank on middle-class support. Such insecurity lies behind its continuing harshness toward political dissent.
Political Dimensions of the Integration of China’s Middle Class with the State
Zhou Xin wrote in the South China Morning Post: Alan Wheatley, an associate fellow of international economics at British think tank Chatham House, said that the rapid improvement of middle-class living standards and households’ significant accumulation of wealth was partly attributable to the Communist Party’s successful economic policies. Many in China’s middle-income group are actually members of the government apparatus, creating an institutional conflict between their desires as middle-class citizens and their duties to the authoritarian state — which could become a threat to social stability if it is not addressed. [Source: Zhou Xin, South China Morning Post, October 12, 2018]
“Look at Singapore, which has become fabulously rich but remains in effect a single-party state, ” Wheatley said. “The Communist Party would be sorely tempted by the Singapore model if — and it’s a big if — it chooses or is obliged one day to move towards a more liberalised political system.” His view was echoed by David Goodman, a professor of China studies at Xian Jiaotong-Liverpool University. Goodman wrote in a paper in 2015 that the middle class is a “state-sponsored discourse” that serves partly “as a tool to legitimise the state”. He sees the middle class in China as being very close to the party-state, and so unlikely to lead to regime change.
In fact, while the phrase “middle class” has been used frequently in research notes and marketing materials, it remains taboo in official Chinese documents. Beijing instead uses “middle-income group” to avoid any political implications. Hugh Peyman, founder of Research-Works, a China-focused investment strategy firm based in Shanghai, said that income inequality, as measured by the Gini coefficient, had risen sharply since reform and opening up began 40 years ago.
But that was a result partly expected by Beijing, he said, because “China had tried egalitarianism, it didn’t work” before late paramount leader Deng Xiaoping began to allow some people and regions to get rich first. He added that China could see more inclusive growth and less income inequality as more people get a better education, and with more investment in research and development and a rising service industry.
Wheatley said that China could learn from the West’s current experience. “Growing inequalities of wealth and income have led to political polarisation in many Western countries. Centre-left and centre-right parties are losing ground to nationalists and populists, ” he said. “China’s circumstances are different but the lesson is still relevant: a broad, thriving middle class is needed for political and economic stability.”
Reduced Spending by China’s Middle Class
China’s burgeoning middle class is seen by some as a savior for its slowing economy. The purchasing power of the group is widely viewed as a primary source of economic growth. But worries about the future, debt and spending on education are constraining consumption of consumer goods, cars and vacations.
An economic slowdown, the coronavirus and a trade war with the US, has reduced consumer confidence, prompting the middle class to become even more cautious in its spending. Growth in retail sales, a barometer of consumer spending, had slowed to some of its lowest levels even before Covid-19 struck. For a few years there has been a heated debate about whether Chinese consumers — burdened by high costs, high debt levels and worried about their future income — are in the midst of a “consumption downgrade”. [Source: Zhou Xin, South China Morning Post, October 12, 2018]
Zhou Xin wrote in the South China Morning Post in 2018: Sightseeing at famous scenic spots, a signature of the middle-class lifestyle, is also losing steam. The number of visitors to the popular Yellow Mountain, or Huangshan, dropped 10 per cent in the first half of this year from 2017, while Zhangjiajie, known for the mountains that inspired the scenery in James Cameron’s Avatar, and Guilin, famous for its soaring karst scenery, also saw fewer visitors in that period, with numbers down 8.5 per cent and 4.5 per cent respectively, according to the financial reports of the listed companies operating the sites.
Orange Wang wrote in the South China Morning Post: Beijing wants the middle class to come to the rescue of China’s economy. But rising costs, mounting household debt, worries about their future income as the economy slows and doubts over whether the government can adequately provide for the ageing population have made consumers cautious. In many cases, they are doing the opposite of what the government wants and pulling back from spending. Whether this so-called consumption downgrade is broad-based — and a threat to Beijing’s economic plans – or not is a matter of intense debate in Chinese policymaking circles. But it is clear that many in China’s middle class are struggling to make ends meet. The National Development and Reform Commission, the government’s powerful planning agency, last month announced that it had organised a special forum to study increasing salaries for lower-middle, middle- and upper-middle income groups, whose average annual individual disposable earnings range from 13,843 yuan to 34,547 yuan.[Source: Orange Wang, South China Morning Post, October 13, 2018]
Spending on Education by China’s Middle Class Deprives Other Sectors of Money
Jane Cai wrote in the South China Morning Post: “It’s a Sunday afternoon, and Amy Jiang is rushing through a packed lunch with her seven-year-old daughter outside her classroom in a shabby building in Beijing. They are on a break between two lessons, each two hours, given by an after-school tutoring company. Like millions of middle-class parents on the mainland, Jiang, a 35-year-old engineer, spends most of her weekends attending tutoring sessions with her child. “I have to be here,” Jiang said. “Some topics are too advanced for kids to understand, such as permutations and combinations in maths, and classical Chinese.” [Source: Jane Cai, South China Morning Post, October 16, 2018]
Jiang spends 12,000 yuan a year on maths lessons for her daughter, 12,000 yuan on Chinese, and 25,000 yuan on English. On top of that, she has spent about 50,000 yuan on dancing and piano lessons for Jiejie, and 20,000 yuan on an overseas trip to help the child “gain some international experience”. Education expenses account for about 30 per cent of her household income, she said. “Don’t call me middle class – my husband and I have never bought any clothes priced higher than 100 yuan since we had Jiejie,” she said. “We’re saving every penny for our daughter, as education provides the only channel in China for ordinary people like me to secure a decent life in the future.”
According to a survey of nearly 52,000 parents across the nation, most of them middle class, conducted by website Sina.com in November, spending on education accounted for an average 20 per cent of household income. About 90 per cent of preschool children and 81 per cent of K12 students, aged six to 18, have attended tutoring courses. Families with preschoolers spent an average 26 per cent of their income on education, while those with K12 children had education-related outlays of 20 per cent of their income. Of all the respondents, about 61 per cent said they had plans to send their children to study overseas.
Since 2013, Chinese spending on education, culture and entertainment, medical care and health has risen steadily, while that for food, tobacco, alcohol and clothing has been declining, official data shows. Retail sales growth, including goods and catering and excluding other services, decelerated from 10.2 per cent last year to 9.3 per cent in the first eight months of this year in nominal terms. The growth slowed from 9.1 per cent last year to 7.5 per cent this year in real terms, according to the calculation of UBS Securities economists led by Wang Tao. Weaker car sales accounted for more than half of the moderation, while spending on medicine, appliances and other goods slowed, as well.
Prospects Dimming for China’s Middle Class?
Zhou Xin wrote in the South China Morning Post: Conventional wisdom assumes that a large and prosperous middle class is emerging in China and its spending will drive the country’s development in the years ahead. But that view is looking increasingly suspect, as the middle class comes under pressure from high costs, rising debt and weak income growth. Heavy air pollution, food safety and vaccine scandals, a rigid education system and an increasingly authoritarian political environment are also big factors prompting those who can afford it to look abroad. [Source: Zhou Xin, South China Morning Post, October 12, 2018]
Li Shi, an economics professor at Beijing Normal University, examined Chinese income and spending data over the last two decades and found there were two issues behind weaker consumer spending. Household income fell back to 50 per cent of the nation’s overall income from a level of about two-thirds of the total in 2000, as more taxes and fees were collected and household earnings increased at a slower pace than government revenue. Li also found that the marginal propensity to consume among China’s urban residents — that is, their willingness to spend on discretionary items — has remained low in recent years due to rising household debt, much of it for housing, and an underdeveloped social welfare system that prompts consumers to save more for medical and old age expenses.
The problem, Li said, was the slow progress on necessary economic reforms so that the government can lower middle-class taxes. “If China wants to boost consumer power, the government has to take less, ” Li said. “But it’s very difficult for the government to take less if there are none of the needed political reforms.” In addition to a tax regime that includes a standard 17 per cent value-added tax and a maximum 45 per cent personal income tax, China has other institutional arrangements — including a state monopoly on land — that drive wealth distribution in favor of the state rather than the middle class. Private property protections are often secondary to the wishes of the state. For example, the Beijing municipal government’s determination to gentrify the city last winter led to a massive relocation of migrant workers and a sweeping closure of small shops and restaurants in the Chinese capital.”
State media has gone out of its way to portray a rosy picture, with the government ordering some financial firms to avoid negative comments about the outlook. In response, critical online commentators have filled social media with headlines such as “China’s vanishing middle class”. The Chinese government has stepped in to offer cosmetic help to the beleaguered middle class. After urban wage-earners complained loudly about the country’s excessive personal income taxes, Beijing cut personal taxes marginally — the first cut in seven years — by raising the monthly minimum taxable income threshold to 5,000 yuan from the previous 3, 500 yuan, but stopped well short of calls for a higher threshold.
Small Chinese firms seek ‘lessons in survival’ as they brace for impact of social welfare taxes Beijing also partly stepped back from its plan to sharply increase collection of social tax payments by small and medium-sized businesses, an initiative that many owners of Chinese factories and workshops fear would have put them out of business. The government told local authorities not to collect unpaid taxes from previous years, but did not specifically scale back its intention to collect more social taxes.
Chinese Professionals Leaving China in Record Numbers
Ian Johnson wrote in the New York Times, China “is losing skilled professionals like Ms. Chen in record numbers. In 2010, the last year for which complete statistics are available, 508,000 Chinese left for the 34 developed countries that make up the Organization for Economic Cooperation and Development . That is a 45 percent increase over 2000. Individual countries report the trend continuing. In 2011, the United States received 87,000 permanent residents from China, up from 70,000 the year before. Chinese immigrants are driving real estate booms in places as varied as Midtown Manhattan, where some enterprising agents are learning Mandarin, to the Mediterranean island of Cyprus, which offers a route to a European Union passport. [Source: Ian Johnson, New York Times, October 31, 2012 +/]
“Most migrants seem to see a foreign passport as insurance against the worst-case scenario rather than as a complete abandonment of China. A manager based in Shanghai at an engineering company, who asked not to be named, said he invested earlier this year in a New York City real estate project in hopes of eventually securing a green card. A sharp-tongued blogger on current events as well, he said he has been visited by local public security officials, hastening his desire for a United States passport. “A green card is a feeling of safety,” the manager said. “The system here isn’t stable and you don’t know what’s going to happen next. I want to see how things turn out here over the next few years.” +/
“Emigration today is different from in past decades. In the 1980s, students began going abroad, many of them staying when Western countries offered them residency after the 1989 Tiananmen Square uprising. In the 1990s, poor Chinese migrants captured international attention by paying “snakeheads” to take them to the West, sometimes on cargo ships like the Golden Venture that ran aground off New York City in 1993. Now, years of prosperity mean that millions of people have the means to emigrate legally, either through investment programs or by sending an offspring abroad to study in hopes of securing a long-term foothold.” +/ “Perhaps signaling that the government is concerned, the topic has been extensively debated in the official media. Fang Zhulan, a professor at Renmin University in Beijing, wrote in the semiofficial magazine People’s Forum that many people were “voting with their feet,” calling the exodus “a negative comment by entrepreneurs upon the protection and realization of their rights in the current system.” +/
Why Chinese Professionals Are Leaving China in Record Numbers
Ian Johnson wrote in the New York Times, “At 30, Chen Kuo had what many Chinese dream of: her own apartment and a well-paying job at a multinational corporation. But in mid-October, Ms. Chen boarded a midnight flight for Australia to begin a new life with no sure prospects. Like hundreds of thousands of Chinese who leave each year, she was driven by an overriding sense that she could do better outside China. Despite China’s tremendous economic successes in recent years, she was lured by Australia’s healthier environment, robust social services and the freedom to start a family in a country that guarantees religious freedoms. “It’s very stressful in China — sometimes I was working 128 hours a week for my auditing company,” Ms. Chen said in her Beijing apartment a few hours before leaving. “And it will be easier raising my children as Christians abroad. It is more free in Australia.”[Source: Ian Johnson, New York Times, October 31, 2012 +/]
“Few emigrants from China cite politics, but it underlies many of their concerns. They talk about a development-at-all-costs strategy that has ruined the environment, as well as a deteriorating social and moral fabric that makes China feel like a chillier place than when they were growing up. Over all, there is a sense that despite all the gains in recent decades, China’s political and social trajectory is still highly uncertain. “People who are middle class in China don’t feel secure for their future and especially for their children’s future,” said Cao Cong, an associate professor at the University of Nottingham who has studied Chinese migration. “They don’t think the political situation is stable.” +/
“Political turmoil has reinforced this feeling.“There continues to be a lot of uncertainty and risk, even at the highest level,” said Liang Zai, a migration expert at the University at Albany. “People wonder what’s going to happen two, three years down the road.” Wang Ruijin, a secretary at a Beijing media company, said she and her husband were pushing their 23-year-old daughter to apply for graduate school in New Zealand, hoping she can stay and open the door for the family. They do not think she will get a scholarship, Ms. Wang said, so the family is borrowing money as a kind of long-term investment. “We don’t feel that China is suitable for people like us,” Ms. Wang said. “To get ahead here you have to be corrupt or have connections; we prefer a stable life.”
Image Sources: Cgstcok photos and Changsan Motors, Wiki Commons, Reuters and China Daily
Text Sources: New York Times, Washington Post, Los Angeles Times, Times of London, National Geographic, The New Yorker, Time, Newsweek, Reuters, AP, Lonely Planet Guides, Compton’s Encyclopedia and various books and other publications.
Last updated October 2021