Chapter 8 2. How big is the middle class in China?

Such a huge developed plate in China also means that China already has a fairly large middle class.According to a 2010 research report by the Chinese Academy of Social Sciences, China has entered a golden age for the growth of the middle class. The middle class is estimated to have reached 23% of the country's population, or about 300 million, and the middle class is expanding at a rate of one percentage point per year.It is generally believed that 40% of big cities such as Beijing and Shanghai should belong to the middle class.How to define the middle class is very controversial, and there is no uniform standard in the world.I have always been curious about India’s claims of 300 million middle class, because my intuition from my many visits to India tells me that the number of middle class in India will not exceed one-third of that in China.Later, I asked a senior Indian economist how to calculate the number of the middle class in India. He said that it was calculated based on a study by World Bank economist Martin Ravallion.I went to check the research of Martin Lavale and found that he used a very broad standard, that is, people with an average daily income of US$2 to US$13 in purchasing power parity are considered middle class. With the US dollar, even if a person is lifted out of poverty, this standard can be used to better measure the prosperity of nationals in emerging economies.I also checked his comparison between China and India using this standard: According to the standard in 2005, the number of Chinese in this income range was 800 million, and that of Indians was 264 million.This standard is obviously lower. It is said that there are 800 million middle classes in China. Most Chinese people do not believe it, but Martin Lavale’s research proves my judgment. The size of the middle class in India is much smaller than that in China (see UK The Economist, February 12, 2009 study on the state of the middle class in emerging economies).

In 2010, the Bank of Asia released a report titled "Key Indicators of Asia and the Pacific Region 2010", stating that the number of middle class in China was 817 million.The indicators it uses are not much different from those of Martin Lavale, that is, people who spend 2-20 dollars a day.The ADB divides this part of the middle class into three categories: "lower class", "middle class" and "higher class".According to the report, 303 million people belong to the bottom middle class in China, and another 500 million people belong to the middle and upper middle class.Chinese people always have high demands on themselves, and there are still a small number of people who think they belong to the middle class.In India, when you stay in any restaurant, the waiter who helps you with your luggage may live in a slum, speak a few words of English, and consider himself a middle-class person.But when you go to Starbucks in Beijing and Shanghai and ask the white-collar workers drinking coffee there, do you count as middle class?He said, what kind of middle class am I, I only have one house.

In fact, even for most citizens of developed countries, the greatest material wealth that they have struggled for in their entire lives is a set of property rights housing.Therefore, considering the situation in China and considering only economic factors, I am more inclined to regard owning a property and a relatively stable income as a rough standard for the middle class.This standard is not low, and it is not specially tailored for developing countries, because only from the perspective of house ownership rate, France is 55%, Japan is 60%, and the United States is 60%, which roughly reflects the size of the middle class in these countries (Switzerland is 36%, but Switzerland is a special category).The middle class also includes the so-called "house slaves", because there are only a few people in the West who pay off their mortgages before the age of 55, and most of them have been "house slaves" for quite a long time. A confirmation of your middle-class status.

The home ownership rate of Chinese residents has surpassed the above-mentioned countries.This is undoubtedly the result of China's rapid development in the past 60 years, especially in the past 30 years.If evaluated in this way, I estimate that the number of Chinese middle class has already exceeded the total population of Japan (130 million), and its size may be between the population of four France (260 million) and the population of the United States (300 million). Probably slightly more than the total U.S. population.Dwight Perkins, director of the Institute of East Asian Economics at Harvard University, believes that the growth rate of China's middle class is accelerating, and it is expected to reach 700 million people by 2020.He uses the economic standard of annual income of 11,800 to 17,700 US dollars (about 80,000 to 120,000 RMB).

Some consumption data also help us determine the approximate size of China's middle class: as early as 2003, China's outbound tourists reached 20.2 million, surpassing Japan for the first time.The average shopping consumption of Chinese tourists in France in 2009 surpassed that of Japanese tourists; in 2009, China became the world's largest car production and sales country, indicating that a huge car consumer group with hundreds of millions of people is forming.By the end of 2009, China's consumption of luxury goods has surpassed that of the United States, ranking second in the world, accounting for about 25% of the world's total.More and more Western brand companies no longer use agents and turn to direct sales in the Chinese market, because the performance of the Chinese market can be described as thriving in today's world.Swiss watch exports to mainland China have jumped from 0.2 percent of Swiss watch exports in 2000 to 5.3 percent in 2009, surpassing Japan, despite China's high tariffs on designer watches.If mainland China and Hong Kong are counted together, the watches imported from Switzerland in the two places in 2009 were close to one-third of Switzerland’s total watch exports in that year, and the main buyers of watches imported from Hong Kong were mainland tourists.If we put aside the value debate about whether brand-name consumption is good or bad, and only analyze the facts, then this information can show that China's consumption power is no longer limited to a few wealthy people, as some people claim, but a huge middle-class consumption. Groups are formed.

We can even make a comparison with the United States.The comparison of Chinese and American household net assets I mentioned earlier is very illustrative, because household net assets can reflect the real wealth of ordinary people far more than per capita GDP.As mentioned earlier, the median household net worth in the United States last year was approximately between US$84,000 and US$93,000, that is, between RMB 560,000 and RMB 620,000.I estimate that there are hundreds of millions of households in China whose net assets have reached or exceeded this level.Of course, this is to some extent due to the appreciation of Chinese real estate, which does not rule out the element of bubbles. After all, when the Japanese real estate bubble was in the past, the assets of the Japanese also surpassed that of the Americans.However, we also have to take into account that the RMB may be undervalued and that the average American family has a larger population than China.

A survey on the net wealth of urban households in China by the China Financial Research Center of Tsinghua University can roughly confirm my judgment.The center’s survey in 2008 (sampling samples were located in 15 cities and collected about 2,100 sample data) found that the average net wealth of urban households in my country in 2008 was 607,000 yuan.In the composition of household assets in my country, real estate is the most important asset, accounting for 62.72%, while cash, demand deposits and time deposits account for more than 15% (see "China Consumer Finance and Investment Education Research Report Released on September 27, 2009 ", Sohu Financial Channel).Although this survey is not an assessment of the median net worth of a family, it is enough to show that our urban residents have a good family background.And this is still a 2008 survey. After 2008, the net wealth of Chinese urban households is still increasing.Undoubtedly, during the 30 years of reform and opening up, the growth rate of Chinese wealth is the fastest in the world.For this alone, the Chinese model is worthy of full affirmation.Many Chinese who have settled in the United States also admitted today that if they had not purchased real estate in their motherland in the past ten years, it would not be easy to return home today.In recent years, China has made rapid progress, and the United States has also retreated rapidly. Once advancing and retreating, the gap between China's developed sectors and the United States has been greatly narrowed.

It should also be noted here that the net worth of households in the United States does not seem to be very large, but the spending power of Americans has remained the world's number one for a long time. This is due to various reasons.The first is that the median statistics omit the wealthy group in the United States.Or take 2004 as an example. In this year, 7.5 million households in the United States had a net worth of more than 1 million US dollars.They constitute a huge high-consumption group.Another important reason is the habit of Americans borrowing and spending.Especially in the past two decades, the habit of borrowing and spending in the United States has been pushed to the extreme: to spend tomorrow's money today, and to spend other people's money is considered a skill.Chinese earn 100 yuan and spend 70 yuan, which is called extravagance, and earn 100 yuan and spend 100 yuan, which is called prodigal son.It is not normal for Americans to earn 100 yuan and spend 100 yuan, but it is considered a hero to earn 100 yuan and spend 300 or 500 yuan.If you can enjoy yourself in time and leave a debt when you meet God, then you are a hero.The state behavior of the United States is also what the Chinese call "eat enough food for what you need."The entire U.S. economy is stimulated by advanced loan consumption.Twenty years of super-scale credit consumption has naturally created the world's largest consumer market.But this approach is also the main reason leading to the financial tsunami.But the United States still seems to have a solution, because the world economy and finance are still mainly exchanged with the dollar, and the United States can still achieve a certain balance by printing money and issuing national debt.The United States can also use its own strength to suppress the appreciation of other countries' currencies to balance its own losses, just as it did when it forced the yen to appreciate.

China has realized the crux of the problem, is gradually linking the RMB to a basket of currencies, and strives to make the RMB internationalized quickly, and finally plays its cards strongly.But the United States will not easily accept the challenges brought about by the internationalization of the renminbi.One euro has already brought too much trouble to it, and another yuan has also become an international reserve currency, and it will feel overwhelmed. We must be aware of this.We must prevent a financial crisis induced by the United States.Once such a crisis occurs, China's economy will be hit hard, or even set back decades and cause political turmoil.But looking at it from another angle, what the United States has done also has enlightenment for us.We should not rely too much on credit consumption like Americans, but we must also consider how to revitalize the assets of Chinese families and moderately expand credit consumption, thereby releasing the consumption power of the people.People who have no loan history in the United States are generally considered to be people with no credit.People who pay off their mortgage in Switzerland are subject to high wealth taxes because you are considered rich.China does not need to copy the Western practice, but moderately expanding credit consumption is a direction of China's economic development.This is very important for the adjustment of our economic structure, and it is also very important for us to transform our economy from being overly dependent on exports to being mainly driven by domestic demand.