Middle-class families in China and the United States are tightening their belts heading into 2023, weighed down by the economic troubles of the previous year which were caused by the wide-reaching coronavirus as well as fallout from the war in Ukraine. In China, media company director Emily Hong is staring down a bottomless hole. The 30-year-old, who lives in the southern Chinese city of Shenzhen a stone’s throw from Hong Kong, still needs to make her mortgage payments despite seeing her salary fall twice since late 2021. The mother of two has asked friends for loans, was forced to sell one of her two flats in 2021 for less than market value, and now lives with her parents. “To make matters worse, I think the financial situation in the next few years will be worse than [in 2022],” Hong said after making drastic cuts to her personal budget. On the other side of the Pacific Ocean, in Gresham, a suburban city in the Pacific northwest state of Oregon, American Gabe Franklin, his wife and their five children are also eyeing a tighter 2023 following high petrol and grocery prices last year. I guess I would say maybe we’d go out to eat less, maybe we’d not spend as much on birthdays Gabe Franklin Christmas expenses were cut and holiday spending will also be scaled back, but for the Franklin’s, they are taking it all in their stride. “If it’s a recession, things might get a little tighter, but not like I’d have to take a second job,” said 45-year-old Gabe, a teacher of 19 years at a private Christian school. “I guess I would say maybe we’d go out to eat less, maybe we’d not spend as much on birthdays.” The economies of China and the United States have long been seen as going hand in hand, but unlike just a decade ago, middle-class Chinese are now seen as being less likely to view their American peers as their economic role models. The East-West differences in hunkering down for 2023 reflect confidence in the status of the US middle-class, which has survived multiple recessions over the past 90 years, compared to China’s more recently minted middle-income bracket, with some fearing an upcoming brush with poverty, according to analysts. “The emergence of a middle class in China is a new phenomenon, while the priority of the middle class in America is to maintain its status,” said Zhu Zhiqun, a professor of political science and international relations at Bucknell University in Lewisburg, Pennsylvania. Fitch Ratings forecasts a mild recession in the US in the second quarter of 2023, while The Economist Intelligence Unit believes China will endure a relatively weak first half of the year after economic growth slowed to 3 per cent last year due to lockdowns and supply chain disruptions. China’s weak economy saw many among its middle class lower their expectations for wealth growth in 2022, with declining demand for goods in the domestic, European and US markets also weighing on their outlook. Only 29 per cent said they got richer in 2022, compared to 55 per cent a year earlier, according to the “2022 White Paper on the New Middle Class” released by independent financial media company Wu Xiaobo Channel. China’s wealthy class feel target on their backs as Xi renews inequality drive But China’s middle class are now seen less likely than ever to aspire to a US middle-class lifestyle. The share of the US middle class has dropped from 61 per cent in 1971 to 50 per cent last year, according to a Pew Research Centre analysis of government data, with both the wealthy and poor having expanded over the past five decades. The Median household income in the US stood near US$65,000 per year last year, which was the highest ever, according to Pew. In China, President Xi Jinping’s common prosperity goal, which aims to reduce the country’s wealth gap, is now the nation’s main development objective and stands to enlarge the middle class. China has more than 400 million middle-income earners, or 140 million families, as part of its 1.4 billion population, National Bureau of Statistics commissioner Ning Jizhe said in January last year. I think most middle-class families will lack the ability to invest in the coming years Emily Hong A typical Chinese middle-income family of three earns between 100,000 yuan (US$14,772) and 500,000 yuan per year, Ning said. Shenzhen’s Hong has switched from buying Bottega Veneta handbags to less expensive “white-label goods” of “good quality”, with the coronavirus hitting China’s middle class with mass lay-offs and salary cuts plus a depreciation of physical assets. “I think most middle-class families will lack the ability to invest in the coming years,” she said. “Children’s education is our biggest expense and priority for ensuring their future [and] at least not being slung out of the middle class.” In Gresham, Gabe Franklin’s US$60,000 annual salary, home ownership and tuition discounts for his children – a welcome benefit as he teaches at their school – leaves him unafraid of ever being unable to pay bills as he does not “live extravagantly”. Beijing urged to ‘bring back’ confidence amid drive for ‘common prosperity’ The stock market remains a concern, however, and he has noticed spending two-thirds more for groceries now than he did five years ago. “My job is more about impacting people’s lives, so I guess I’m not in a place where I need to make more money,” he said. Ann Hsu, 55-year-old mother of two in San Francisco, defines her own middle-class lifestyle as one that shuns luxuries. The widow sends her twin teenage boys to her city’s public schools and lives on state benefits and the rental income from a property she owns in a bayside city near the airport. If 2023 turns out to be economically tough in her ultra-wealthy part of the US, Hsu anticipates no lifestyle changes even as others cut back on travel or put off buying new cars. I’ve never been really rich or been really poor, so I never pay much attention Ann Hsu “I’ve never been really rich or been really poor, so I never pay much attention,” said the former tech entrepreneur, who now invests her time now in local politics and education. “Personally, I don’t have very luxurious desires and wants, so pretty much anything I want I can afford to buy. I don’t have luxurious tastes, so I don’t have to cut anything.” Property investment has become one of the best ways to increase household wealth in China over the past 20 years, with the average share of home equity in the wealth of middle-class households around 56 per cent, according to the Wu Xiaobo Channel white paper. “You’re nobody if you don’t own an apartment,” said Dexter Roberts, a former Beijing-based writer who is now a senior fellow at the Atlantic Council’s Asia Security Initiative in the US. As many middle-class people find their status tenuous – hemmed in by laws that favour urban natives over migrants from the countryside – “people are very protective of what they have and for good reason,” he added. Are China’s frustrated middle class ‘lying flat’ as wealth outlook changes? Guangdong province expat Nick Liang founded an advertising agency after working for international fast consumer goods brands for years. But now the 44-year-old’s three properties in the province have depreciated in value up to around 20 per cent and his Japanese whisky collection and Rolex watch are depreciating too “because everyone’s income has plummeted” since last year. After decades of work to relieve extreme poverty, China is keen to keep its middle class afloat, said Stephen Pau, chief investment officer of Hefeng Family Office in Guangzhou, which invests for families where elders are looking for ways to keep money safe for their children. “The system in mainland China is more focused on providing security for low-income people and more affordable public services, and that depends on a system in which the majority of state-owned enterprises do not have profit making as their primary goal,” Pau said. Back then, their highest goal was to send a kid to Harvard Scott Savitt Scott Savitt, an American author and schoolteacher who spent 18 years in China until 2000, said Chinese people he knew aspired to raise their class status by moving to the US. Now, shifts in American politics over the past five years have deterred them from seeing the US as part of their goal, he said. “Back then, their highest goal was to send a kid to Harvard,” said Savitt, who now lives in the US state of Michigan. “Maybe, eventually it could be again.” Today’s US politics favour the wealthy because they can pay influential people, while members of the lower classes often must take time off work to vote, noted Ker Gibbs, the former president of the American Chamber of Commerce in Shanghai. Chinese state-controlled media have magnified the problems in America and played up the hallmarks of domestic economic progress, in turn inspiring people to seek rewards at home. We used to admire the freedom and fashion of America, but now the younger generation is no longer so envious Jenny Zhon “We used to admire the freedom and fashion of America, but now the younger generation is no longer so envious,” said Jenny Zhong, who runs an arts and crafts business in Guangzhou. “In the 2000s, we loved the characters in Sex and the City and the look of New York. Nowadays, young Chinese white-collar people rarely use VPNs to watch American series and movies. They are more proud of their hobbies and lifestyle spreading in domestic social media, as well as China’s advanced infrastructure.” The refocus on China rather than the US happened within the past decade, Guangdong province expat Liang said. He recalled when middle-class Chinese people would pursue a Western-style civil society, hoped to invest in overseas property and bought foreign brands. We know the two countries are decoupling, but it’s too early to say who would win and stand out in the tech and energy competition Raymond Lu “Now we can feel that the progress of globalisation has almost come to a halt, and the growing so-called middle class of our kind has to turn to the domestic market and do things that are in line with China’s trends, and must invest cautiously.” he said. These pursuits replace “following the economic and political system in the United States like before,” he added, citing trends he has seen in the entertainment and advertising industries. Raymond Lu, a 40-something, US-educated employee of a medical equipment firm in Jiangsu province, said he still does not believe the middle class in China and the US can compare in terms of disposable income, but that the impact of “decoupling” is unclear. “We know the two countries are decoupling, but it’s too early to say who would win and stand out in the tech and energy competition,” he said.