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News - Editor, 22 July 2011

Growing China's "Middle-Class"



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Amid concerns about the widening gap between the very wealthy and those living in poverty, the Chinese government has made known its intention to steer the economy in the direction of developing the country’s domestic market, rather than looking to the export market for growth. The focus will be on moving citizens of China from the below-the-breadline bracket into middle-class, while at the same time growing the wealth of the current middle-class, all with a view to promoting social harmony and preventing discontent among the masses.

However, while this strategy of domestic growth sounds like a good idea, in reality it appears not to be working. This is reflected in recent data indicating that consumer spending, when taken as a percentage of China's GDP, is not growing – it is shrinking. Moreover, consumer activity in the United States and Europe remains at low levels as these countries battle with unemployment, austerity measures, and other factors affecting economic recovery. China is not immune to what is going on in the rest of the world, and since late 2008 the country's export market has been taking strain, while domestic prices, particularly food prices, continue to rise, with the very poor being hardest hit by economic conditions. Authorities have been creating jobs by implementing infrastructure projects such as the building and renovating of airports, and construction of high-speed rail transport.

Defining what "middle-class" actually means in China is a difficult task. This is one of the issues dealt with in a recently published book by author Helen H.Wang. With the title of The Chinese Dream – The Rise of the World’s Largest Middle Class and What It Means to You Wang notes that how the middle-class is defined depends very much on who one is talking to and what statistics one uses. Most often, income is used as the benchmark, and according to the McKinsey Global Institute, measured in purchasing power the Chinese middle-class includes an annual income group of between $13,500 to $53,900. The Chinese Academy of Social Sciences focuses on assets, defining middle-class families as those having assets valued between $18,000 and $36,200, while official figures from the country's National Bureau of Statistics put middle-class households in the range of $7,250 to $62,500 income bracket. In 2010 it was estimated that about 25 percent of China's population fell into this last bracket as determined by the National Bureau of Statistics.

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