The question mark hanging over China’s 400 million-strong middle class

China’s middle class is something of a mythical entity, with wide-ranging estimates of its size and economic power. Optimists believe a large and growing middle class has the ability to lift China – and even the world – to a more prosperous level, while pessimists foresee an increasingly burdened group that could cause the economy to stagnate and even lead to political chaos. In the first of a four-part series, The South China Morning Post examines the myths and reality of the middle class to reveal the economic and political implications of its evolution.

Conventional wisdom assumes that a large and prosperous middle class is emerging in China – hundreds of millions of urban white-collar professionals and private business owners deeply integrated into the Chinese economy, whose spending will drive the country’s development in the years ahead.

But that view is looking increasingly suspect, as the middle class comes under pressure from high costs, rising debt and weak income growth. Heavy air pollution, food safety and vaccine scandals, a rigid education system and an increasingly authoritarian political environment are also big factors prompting those who can afford it to look abroad. And the trade war with the United States threatens to make these problems worse.

China’s economic boom over the last 40 years helped create today’s Chinese middle class. Whether the government can address their concerns could well determine the country’s future economic trajectory, and possibly have an impact on its political landscape, too.

How big is China’s middle class?

Estimates of the size of China’s middle class vary, depending on the definition. China’s statistics agency puts the figure at nearly 400 million, less than a third of the population, by defining a middle-class household as one making 25,000 yuan (US$3,640) to 250,000 (US$36,400) yuan a year – a fairly low threshold. But in a 2015 report, investment banking company UBS and PricewaterhouseCoopers narrowed it to 109 million Chinese with wealth of between US$50,000 and US$500,000 – a relatively high standard.

Whatever the measure, it is clear that China’s middle class is large in absolute terms but still relatively small as a share of China’s 1.4 billion people. In comparison, more than half the US population is considered middle class, while in South Korea it is two-thirds.