The Future of China’s Economy: Its Middle Class

Two Wall Street Journal articles caught my eye this morning: The Future of China’s Economy: Yuppies and Women Fuel China’s Fitness Craze. Both discuss the spending power of the Chinese middle class.

Trendy Chinese consumersIn the first article, author Laurie Burkitt wrote that China’s economy will be relying heavily on “yuppies” – young urban professionals:

According to a new study from the consultancy the Boston Consulting Group and Alibaba’s Aliresearch, richer, younger and tech-savvier Chinese will be the main drivers of growth in the country’s consumer economy going forward. Affluent consumers, shoppers under the age of 35 and Internet surfers will push China’s consumer market up to $6.5 trillion in sales by 2020.

This projection is based on GDP growth at only 5.5% (compared to nearly 7% currently). I am not surprised. For years, I have been saying that the rise of the Chinese middle class is the biggest story of our time.

The article defines the Chinese “upper-middle class” as those earning annual incomes between $24,001 and $46,000. This is way too conservative. In my research, upper-middle class people in China can make up to $60,000 in annual income.

Here is how I define the Chinese middle class.

The second article, Women Fuel China’s Fitness Craze, shows that young Chinese women are spending much more than average Americans on fitness and sports clothes. For example, one young woman in the article, Wang Xiaoyi, spent more than $250 a month on gym fees, and over $770 on Nike and Lululemon gear.

In the U.S., an average membership fee for the YMCA is about $90 per month for the entire family. I love Lululemon yoga outfits myself, and I seldom hear about people spending more than $700 for them!

Companies like Nike and Addidas have already enjoyed tremendous success in China. Other sports fashion brands are catching up:

Under Armour, which entered the market in earnest three years ago, recently opened a 14,000-square-foot store in Shanghai. Lululemon regularly hosts large events, such as a recent 1,200-person party on the Bund in Shanghai, that included a 10K race, beach yoga and volleyball, to help promote the brand.

With all the talk about China’s economy slowing down, the Chinese middle class is still holding up as a major driving force. Young urban consumers are less conservative than older generations, and are more willing to spend.

Moving forward, the story of China’s economic miracle will depend on the Chinese middle class!

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