Will the Chinese Government Deliver on the New Five-Year Plan?

Forbes: Helen H. Wang
China Premier Wen Jiabao deliver the Report on...

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With an iron fist to rule out any source of instability, the Chinese government is determined to set the country on the right path. The new five-year plan, unveiled at the National People’s Congress session in Beijing this past week, set ambitious goals for what China would like to achieve in 2015: move to more evenly distributed incomes, a greener environment, and higher up the value chain for its industry.

At the heart of the five-year plan is a focus on boosting domestic consumption and restructuring its economy toward more sustained growth. The plan addresses two critical issues that are of paramount importance to China’s fledging middle class: inflation and affordable housing.

Since last year, the Chinese economy has shown signs of overheating due to the extensive government investment in infrastructure. Food prices rose sharply at 11 percent in February, creating much public anxiety. Skyrocketing real estate prices are like a dagger in the heart of the new middle class who see their dreams of owning homes as unattainable.

The new five-year plan aims to lower GDP growth to 7 percent in an effort to tame inflation. The government also plans to build 36 million affordable homes in the next five years. Premier Wen Jiabao repeatedly stated that improving people’s livelihood is the top priority of the government.  All these measures are intended to address the root problems of public discontent and help maintain social stability.

Reigning in inflation and providing affordable housing are important steps to foster a growing middle class. A major hindrance to increased Chinese consumption, however, is the country’s high saving rate, which reflects the underlying insecurity the Chinese feel about their future.

In writing my book The Chinese Dream: The Rise of the World’s Largest Middle Class and What It Means to You, I interviewed over 100 people in China. They are from all walks of life and are the new members of the Chinese middle class. The biggest concern they have is social security.  Most people I talked to save 25-50 percent of their incomes for a rainy day, as I wrote here.

Victor Ku, a hotel manager in Guangzhou, told me that he had to save two-thirds of his income. “I have to pay for my own health expenses,” he said. “In China, we don’t have security. If you get sick, you can immediately become poor.”

In 2009, the Chinese government announced a plan to spend $124 billion to overhaul the country’s broken healthcare system. Since then, the government has increased insurance coverage in rural areas and allocated funding to build more community clinics.

However, the underlying problems remain as hospitals continue to rely on revenues from drug sales and expensive treatments. World Bank research shows that more than 40 percent of healthcare spending in China goes to purchasing medicine, a disproportionately high amount compared to other countries.

Which leads to another problem that the government has not been able to successfully address: corruption. Corruption is so endemic in Chinese society that it has become a national ill. It ultimately reflects a system that lacks the function of cross-checks, and is a major source of social instability that the government is so firmly intent to prevent.

Stephen Roach, former chairman of Morgan Stanley Asia, believes that the new five-year plan will “spark the greatest consumption story in modern history.”

The next five years will be crucial for China to develop a larger and more stable middle class. Will the government achieve all the goals set out in the plan? Most likely. Judging from its past performance, I would not underestimate the Chinese government’s ability to deliver. Will China become a more open society? Sooner or later, when the Chinese government sees it is in its own interest to let go of control.

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Will China’s Consumer Driven Middle Class Become the Saving Grace for America’s Economic Woes?

Surprisingly, The Chinese Dream may just turn out to be the American Dream.

PALO ALTO, Calif. March 14, 2011 – Helen Wang, the author of The Chinese Dream: The Rise of the World’s Largest Middle Class and What It Means to You will speak to The INSEAD Alumni Association of Northern California on April 4, 2011 in Palo Alto about the challenges and opportunities of a rising Chinese middle class. Continue reading

Times Have Changed: No More “China Produces and America Consumes”

Forbes: Helen H. Wang

When I started to write my book The Chinese Dream three years ago, people in the United States did not even believe there was a middle class in China. Today, China’s middle class is already larger than the entire population of the United States and is expected to reach 800 million in fifteen years.

If this prediction sounds too bullish, chances are it is not. In 2006, McKinsey predicted that the by 2025, the Chinese middle class would reach 612 million and China would become the third largest consumer market in the world after the U.S. and Japan.

These numbers are already outdated.  A recent Credit Suisse report predicts China’s consumer market will reach $16 trillion by 2020, overtaking the United States as the world’s largest consumer market in the world.

2020 is less than ten years from now. Whether or not China will become the world’s largest consumer economy remains to be seen. However, this much is clear: the Chinese middle class has already changed the dynamics of the world we live in. The world is no longer “China produces and the United States consumes.” U.S. exports to China are growing almost two times as fast as overall U.S. exports, supporting half a million jobs. Continue reading

What Is the Chinese Dream?

Forbes: Helen H. Wang

In an event in Silicon Valley, someone asked me: “In one sentence or two, would you tell me what is the Chinese dream?” (as he learned I wrote a book called The Chinese Dream).

A simple question, but no simple answers.

When I left China 20 years ago, there was no Chinese dream. I had to leave my country and come to America to pursue my dream of a better future. But today, many young people in China can start their own business and have a lot more opportunities. Even many of my American friends are going to China because of the tremendous opportunities presented there.

As a Chinese magazine editor told me bluntly, “The Chinese Dream is a copy of the American Dream.”

Many middle class Chinese are influenced by the American way of life. They are bombarded by many material temptations and proliferating choices. TV commercials, the Internet, and Hollywood movies give them a rosy picture of the American middle class.

One Chinese blog described it this way: “American middle class people live in a villa with a two-car garage in the suburbs. In front of the house, there is a green lawn. They have 2-3 children, and a dog. The husband goes out to work, and the wife stays at home taking care of the children. On weekends, they drive their SUVs to the countryside for barbecues and camping.”

That is the picture in most Chinese people’s minds of “the American Dream”— owning a big house, driving a nice car, and having a comfortable life. The Chinese middle class wants it all. Continue reading

Chinese-American author breaks ground on China’s middle class growth explosion

“The Chinese Dream: The Rise of the World’s Largest Middle Class and What It Means to You” by Helen H. Wang brings a fresh paradigm on how we view U.S.–China relations

PALO ALTO, Calif. Nov. 29th, 2010 – In her new book, “The Chinese Dream: The Rise of the World’s Largest Middle Class and What It Means to You” (ISBN 1452898049), Helen Wang examines the impact of a growing Chinese middle class on the United States and the world. As a Chinese native and American citizen, Wang challenges readers to recognize that some of our fears about China are misplaced.

Over the next 15 years, Wang estimates China’s middle class to reach a population of 800 million, more than double today’s number. While some in the West fear the fast growth within China poses a global threat, Wang presents readers with information and research showing how this rising middle class will provide enormous opportunities for Western companies and become a balancing force that could help with America’s economic struggles. Continue reading