In Shanghai, the wage floor for calculating social welfare payments was raised to 7,310 yuan per month from July, based upon the city’s average monthly salary of 12,183 yuan last year.
As such, the real size of China’s middle-income group could be smaller than official calculations.
But rather than asking how big this group is, the more important question is how much it can grow. There is little doubt that China’s economic rise has created a sizeable middle class, which includes affluent urban residents in major cities and coastal areas. And there are hopes that more Chinese people will become modern consumers.
If we take the experience of other developed economies as a reference, such as Japan, where middle-income people account for two thirds of the population, then China’s middle-income group has the potential to double from its current size.
The prospects of a single country with between 800 million to 900 million middle-class spenders will make China an irresistible market for multinational companies.
Children pose for a photo at Tiananmen Square in Beijing. Photo: AP Photo
Still, the optimistic forecast that China will turn most of its population into middle-income people faces scepticism, particularly after the country removed its draconian pandemic controls and reopened its economy. Consumer spending, which had been expected to be a strong engine for growth, has instead become a weak link.
A particularly worrying phenomenon is that China’s middle class is bearing the brunt of the nation’s economic changes. The typical middle-class lifestyle, which includes buying a nice flat by taking out a big mortgage, and sending children to expensive private schools, has quickly become unachievable as a wave of job cuts hit urban families.
The fall in high-paying private sector jobs has also burned the social ladder for many families who were on their way to becoming part of the middle class.
In sum, it is very easy for an existing middle-income household to get kicked out of the club, and very hard for a poor household to join in.
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