Li Keqiang

Beefing up the middle-class meat in the economic sandwich

PUBLISHED : Sunday, 19 February, 2012, 12:00am
UPDATED : Sunday, 19 February, 2012, 12:00am


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For the last few weeks, Chinese leaders and US politicians have been addressing their chief domestic audiences. The main difference is that while the Americans see their middle class as an endangered species, Chinese leaders see them as saviours of the nation.

Last week the Communist Party journal Qiushi published a commentary by Vice-Premier Li Keqiang , widely expected to become China's premier next year. In it, Li stressed the need for China to enlarge its share of 'middle-income earners'.

The phrase 'middle class' is still something of a heresy to the old school of Marxism-Leninism, so official documents and propaganda use the easy replacement of 'middle-income earners'. And, implicitly, whether the middle class constitutes a social stratum is not an issue officials want to discuss now.

They prefer to treat it as an economic issue, as does Li. He calls for officials to be more aware of the importance of consumption - whether to help tide China over its present difficulties or to boost its long-term economic health.

For too long, Li argues, China's economic growth has been 'passively' pulled along by investment, rather than driven by consumption. As a result, consumption's share of GDP was 47 per cent in 2010 - markedly lower than many other countries, not only the US (88 per cent) and Japan (79 per cent), but also the average of the world's middle-income countries (about 67 per cent).

Li argues that this situation 'must be redressed'. China should design various ways for low-income people to earn more, so that the middle-income earners can become a larger part of the population.

Li suggests many remedies: more wage rises, a larger social security network, business incentives, subsidised housing and more affordable medical care.

Li is not alone in this view. The author of a column in People's Daily said tapping the 'unique advantage' of the nation's middle class was strategically significant to China's next stage of development.

Just how large is China's middle class? Nanjing University sociology professor Zhou Xiaohong said that about three decades of market-oriented reform had elevated 20 per cent of the Chinese population into the middle class.

Zhou also says this group has a 'unique advantage'. They are pioneers in society not only through earning more, but also being willing to spend more. They use private banks, look for investment opportunities and are happy to use consumer credit. They also tend to spend more on education, travel, and various 'cultural products and services' such as books and movies, Zhou says.

A week ago, a research paper jointly released by the China Social Sciences Academic Press and the Shanghai Academy of Social Sciences, forecast that by 2020, the middle class would make up 40 per cent of the mainland population.

But, not everyone is so optimistic. A piece in the Yanzhao Metropolis Daily in Hebei province was quick to ridicule the claim. In reality, it said, it was the poorer part of society, not the middle class, that appeared to be growing.

Sky-rocketing housing prices, a lack of jobs, and the widening wealth gap were making social mobility increasingly difficult in today's China. Any misstep would easily send a middle-class person back to the 'new poor', it said.

Even an article in the magazine Insight China, a subsidiary of Qiushi, said China's middle class was on the verge of a total collapse due to housing and education costs.

And, a commentary in the Qianjiang Evening News in Zhejiang province lamented that, in comparison with the leisurely lifestyles depicted in Western soap operas - still the main window for most Chinese on life in the West - it was evident there was still no middle class in China.