China wants its middle class to spend big … but they have bills to pay
Many consumers are tightening their belts as they worry about what the future holds
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 this, the second of a four-part series, The South China Morning Post continues to examine the myth to reveal the economic and political implications of its evolution.
Beijing wants the middle class to come to the rescue of China’s economy. But rising costs, mounting household debt, worries about their future income as the economy slows and doubts over whether the government can adequately provide for the ageing population have made consumers cautious.
In many cases, they are doing the opposite of what the government wants and pulling back from spending. Whether this so-called consumption downgrade is broad-based – and a threat to Beijing’s economic plans – or not is a matter of intense debate in Chinese policymaking circles. But it is clear that many in China’s middle class are struggling to make ends meet.
The experience of a young finance officer in Beijing, surnamed Deng, is a typical one. Deng admits she occasionally has to borrow money from her Jiebei account – also known as Ant Cash Now, a mobile-based consumer loan service of Ant Financial – not to buy cosmetics or clothes, just to pay her rent.
A film company employee, Deng makes 5,400 yuan (US$780) a month after taxes, just above the average monthly disposable income of 5,180 yuan in China’s capital in the first half, and close to last year’s average for the high-income group of 5,411 yuan, according to government data.
But half of Deng’s earnings are taken up by rent. She runs short of cash from time to time so has to borrow more. A recent transaction record of her Alipay mobile-based payment account shows spending for only two items: food delivery and ride-hailing. Not a single luxury purchase appears on the bill, but every month there is almost nothing left in her bank account.
“I would be rich if I didn’t have to pay the rent,” said the twenty-something woman. “I buy cosmetics infrequently, almost all of my spending is just on food.