Chinese Government Pushes to Increase the Middle Class

It’s ironic that people in the United States are complaining about the shrinking of the middle class, while the Chinese government is pushing aggressively to expand its middle class.

Recently, Chinese Premier ????? has raised minimum salaries and welfare spending as a measure to close the gap between the rich and poor. Rural per capita incomes increased 12% in the first half of this year, comparing to 10% increase in urban income for the same period.

The rising income left people with more to spend on consumer goods. China’s retail sales increased almost 14% in July. Sales of clothing, furniture, building materials and home decoration goods have experienced substantial growth for the first half of this year.

As part of its strategy to sustain high speed growth without relying on export, the Chinese government also encourages citizens to consume rather than save. Its current five-year plan has a heavy focus on improving the fundamental for consumer spending. The government plans to build retail chains and convenience stores in the countryside.

This is not the first time that the Chinese government intervenes in its economy. Recently, when there was over-investment in real-estate, the government exercised a crackdown. Someone told me that the Chinese government is like a water-skier behind a boat, every now and then yanking on the rope to alter the boat direction a bit if it heads off course.

It’s true the Chinese government is very sophisticated and business savvy. It operates very much like a corporation. As James McGregor pointed out in his book One Billion Customers, if the business community is the “old boys” club in the West, the Chinese government is the “old boys” club in China.

Pretty soon, I would expect a case study from Harvard Business School on how Chinese government has successfully run its gigantic business :-).

, , ,

17 thoughts on “Chinese Government Pushes to Increase the Middle Class

  1. dumbdodi,

    Thank you for stopping by.
    You are truly insightful (I really mean it :-)), and you are genuine that I see as a precious quality in you.

  2. Helen,

    Really interesting article! It is through policies of our governments that China’s middle class grows, while the US middle class is shoved further down the socio-economic scale.

    Was in China this time last year with my whiskey client. I was there to see how Chinese consumers thought about a completely American brand, Jack Daniels.

    Surprisingly, despite its rural and somewhat downscale appeal here in the US, affluent Chinese consumers were perfectly willing to put down a significant amount of money to buy an entire bottle, and place it on the table so that everyone could see that they bought it.

    It was fun watching them get used to the “mouth feel” of Tennessee whiskey, considering that many had been drinking Johnny Walker or Chivas.

    It was also fascinating to see how they took this quintessential American drink and made it classicly Chinese, by mixing it with Green Tea.

    Today, a full year later (and employed by a different company), I still like my JD with Green Tea.

  3. Well, it does seem to me that China’s star is rising as it were. They’re going to be the next U.S. at this rate.

    Quite an informative and interesting article. Too bad this country seems to be waging war against it’s middle class. They could take some lessons from China…but then I can imagine the right wing rhetoric coming from that suggestion!

  4. this article reminds me of the Thomas Friedman book “The World is Flat”. some decades ago, moms in the west n the US ask their children to eat their food because childrens in China and India are starving..

    But now the moms ask their children to study because people from these asian countries are eager to grab their job.

    China has become the Asia manugacturing hub which the Asian countries has longed for so many years.
    It has over taken the Japanese as well.

    The Chinese enterpreneurs are well strong and are ready to take the risk because they know their govt is behind them…

    It will not be a surprise if China take over the US in economy in the near future…

    But the dragon has got to do more …

  5. Marsha and millenium,

    Thank you for your comments. It’s interesting millenium refered to Tom Friedman’s book “The World is Flat”, I do feel the world is getting flatter.

    But I am not that sure Chinese government behind the entrepreneurs that much… they definitely have got to do a lot more.

  6. Helen

    Very well written article. As far as the Chinese taking over the American economy, I do not see that happening.
    They are going to have to open up more and grant more freedom.

  7. Excellent article again, Helen.
    I think Freedom will follow the middle class in China, as it eventually did in Europe.
    Too bad we are apparently going backwards- George II is murdering the middle class and the bill of rights at the same time. Think it’s a coincidence?

  8. Edward, thank you again for stopping by. As far as I see it, America has different strengths.

    Jennifer, Thank you for sharing your insight. I agree with you that freedom / democracy will follow the middle class – it’s already happening to some degree.

  9. Diana,

    Thank you for the link to Time Magazine’s article. It’s very interesting… and the incident happened in my hometown Hangzhou!

  10. it’s so happy to see lots of paople are interest in China,and it’s a interest article as many firends said,anyway i just wanna to say China is like a new born in the current economy, she needs to learn from the world and the GOV just like our hand to reach the outside first, i’m not saying that i’m 100% agree with what the chinese GOV does, but it’s just a period of time to let the chinese grow up! ^^

  11. Thats a nice post on china..you know usually we are treated to american views on China .Its great to know that the people’s republic is trying to bridge the income gap and increasing consumer spend…the BEST thing about china is the administration does not have to play “party politics” during election years and harm the nation with “populist” mistakes.

    Again informative post !!

  12. Interesting story. The destruction of the middle class is already happening. Don’t just blame it on the current President. This has been happening for years here. Big corporations have taken over most of the privately owned businesses. Politicians and rich people gain more money from gov’t defense contracts, tax loop holes and shipping their work overseas to earn even more money. Americans are underemployed and unemployed. Hardworking families loose their homes. The homeless population grows everyday. Yet the lobbyists continue to donate to Presidential campaigns insuring everything stays the same. The real thieves are not the drug lords or the common criminals, they are some of the politicians and corporate big wigs. They are raping and pillaging the middle class. America the Land of the Free is the Land of the Greedy, Miserly, Cheating, Rich People.