The Growth of the Chinese Middle Class

There are a number of predictions for the future growth of the Chinese middle class from Goldman Sacks, the Boston Consulting Group, and McKinsey Global Institute. The numbers are more or less the same.

In my forthcoming book The Chinese Dream, I mainly cite predictions from the McKinsey report From ‘Made in China’ to ‘Sold in China’: The Rise of the Chinese Urban Consumer. (For the definition of the Chinese middle class, please see my previous post).
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Myths about China’s Exports

News is out that China overtook Germany to become the largest exporter in 2009 (not surprisingly). Its share of world exports increased to almost 10 % – about the same slice as Japan’s exports in 1986. A recent Economist article predicts that if China continues its current pace, its share of the world’s exports will increase to about 25 percent in ten years.

As I dug deeper, however, I saw a different side of the story. China’s exports actually fell by 17 % in 2009. Its imports, fueled by a burgeoning middle class, have been stronger than exports, increasing by 27 percent while exports were falling. Continue reading

The Chinese Dream

The Chinese Dream is the first book about the Chinese middle class that is already 250 million strong and will reach 600 to 800 million in fifteen years.

• An inside view of one of the most dynamic but little-understood sectors of Chinese society

• Compelling interviews and personal stories reveal the varied motivations, aspirations, and backgrounds of the Chinese middle class

• Illuminates both the unexpected similarities and complimentary differences between the Chinese and Western middle classes

Apprehensions about China abound. People fear the country’s recent record growth, believing a strong China presents a threat to the West. But these fears are misplaced. In a vibrant portrait of this dynamic sector of Chinese society, Helen Wang demonstrates that a rising Chinese middle class will be a complementary force in the global community and benefit the world as a whole. Continue reading

The Definition of the Chinese Middle Class

Defining the Chinese middle class can be confusing, depending on whom you talk to or which numbers you use.

The most common definition uses income as a measurement. According to McKinsey Global Institute, the Chinese middle class is those people whose annual incomes, in terms of purchasing power, range from $13,500 to $53,900. The Chinese Academy of Social Sciences (CASS) released a report in 2004 defining the Chinese middle class as families with assets valued from $18,100 to $36,200 (150,000 to 300,000 yuan). The official data from China’s National Bureau of Statistics categorize the Chinese middle class as households with an annual income ranging from $7,250 to $62,500 (60,000 to 500,000 yuan).

These numbers not only vary, they are also misleading. The cost of living in China is very different from that in the West. For example, a person making $1,000 a month can have a good standard of living in China, whereas he or she would need some kind of additional assistance in the United States. Even within China, living standards in the major cities, Beijing and Shanghai, are very different from those in smaller inland cities such as Hefei and Kaifeng. A rule of thumb is that middle class people have available one-third of their income for discretionary spending. This group of people has passed the threshold of survival and does not need to worry about the basics such as food and clothing, and it has some disposable income to buy discretionary goods and services.

In addition to income measurement, a research team led by Professor Zhou Xiaohong in Nanjing University further defined middle class occupations as professionals in management and technology, entrepreneurs, private business owners, and civil servants (meaning government officials). Unlike in the United States, middle class Chinese are concentrated in large cities. They are also relatively younger than middle class Westerners.

Since “middle class” is a Western concept, to a certain degree, it contains mythical elements for many Chinese. For example, they think middle class Westerners all own homes, drive cars, and travel for vacations. In addition, Chinese believe middle class people should have good manners and a tasteful lifestyle. They do not consider less-skilled professions such as waiting tables as middle class. In China, rural migrants who earn very low salaries mostly fill those jobs.

In The Chinese Dream, I use a combination of these definitions: urban professionals in foreign companies, private businesses, or state enterprises, government officials, and entrepreneurs, who have college degrees and earn an annual income from $10,000 to $60,000. Over three hundred million people, or about 25 percent of China’s population, met these criteria in 2010.

For the future growth of the Chinese middle class, please see here.