A Map to Middle Incomers’ Havens

A Map to Middle Incomers’ Havens

By Lan Xinzhen

The term “middle income” first started to appear in Chinese government documents in 2010. China’s concept of a “middle-income group” was borne of its goal to complete the building of a moderately well-off society in all aspects by 2020.

The definition of middle income is in a process of continual evolution in tandem with changes in a country’s society and its economic structure. In China, the middle-income bracket is characterized by three main attributes. To begin with, their incomes are moderately above the average level, and their living conditions and sources of income are stable. Next, they work in a whitecollar environment. And finally, they possess roughly similar values and codes of conduct.

Middle-income earners are not only capable of ensuring the basic needs of their whole family, but also enjoy a surplus of purchasing power to achieve development and entertainment goals.

The history of human society’s development shows that when middle-income earners encompass the majority of a nation’s population, its social and economic development tends to stabilize as well. The consequent “olive-shaped” income structure is a goal pursued by all governments.

However, China is far from achieving this target, as it is still composed of a “pyramid” pattern.

According to the Global Wealth Report 2015 released by the Credit Suisse Research Institute, people at the middle-income level or above only account for 11.3 percent of China’s adult population, which implies that a majority of Chinese people are still living below the cut-off line.

It therefore came as no surprise that in May, President Xi Jinping convened a high-profile meeting focusing on how to boost China’s middle-income group, reflecting the government’s commitment to this objective.

Although the Global Wealth Report 2015 put China’s middle-income population at 109 million, based on calculations derived from household income released by China’s National Bureau of Statistics (NBS) for the first half of 2016, the country’s middle-income population is actually closer to 200 million. Regardless of which of these statistics is the most accurate, one thing is certain—China’s middle-income population must be doubled.

However, China has to overcome some major obstacles in order to do so. First of all, China’s economic growth is slowing down, which in turn affects people’s incomes. China’s export-oriented businesses, for example, have yet to fully recover from the global financial turmoil that took place in 2008—disturbing the job market and also suppressing the growth of workers’ incomes.

According to the NBS, in the first half of this year, the per-capita disposable income of Chinese residents was 11,886 yuan ($1,791), a nominal increase of 8.7 percent year on year, but the growth rate dropped by 0.3 percentage points. After allowing for price changes, the actual annual growth was 6.5 percent, down by 1.1 percentage points over the same period last year.

These figures demonstrate that Chinese residents’rapid income growth has slowed down. More importantly, the capricious economy has put some white-collars at the risk of losing jobs. A large number of middle-income earners are facing the same amount of pressure as those who are struggling to join the group.

In 2015, China’s Engel Coefficient, which measures how much income households spend on food, had dropped to 30.6 percent, approaching the threshold of affluence defined by the UN at 20-30 percent. Generally speaking, this should be demonstrative of a thriving middle-income group, but structural inflation has led to the opposite scenario. For example, rocketing property prices and education expenses have already cast uncertainty over the economic well-being of many Chinese.

Another major hurdle that needs to be overcome is China’s illusion of wealth. Thanks to its expanding comprehensive strength, China is now seen as “rich” on the international stage. A lot of countries hope to attract capital from China as well as Chinese tourists. The media at home and abroad keep reporting on Chinese tourists’shopping sprees abroad. However, this kind of wealth is represented by a fraction of China’s population. This illusion must be dispelled lest China’s decision-makers relax the reform of wealth distribution and efforts to increase residents’ incomes.

Many other factors can also handicap the expansion of the middle-income group, but those outlined above must be addressed immediately since they have a large influence on China’s economic reform, social wealth distribution, social safety nets, etc.

Copyedited by Bryan Michael Galvan

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