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Why China's Middle Class Is Suddenly Being Squeezed

Chinese middle class in constant stress
Chinese middle class in constant stress
Jiang Han

BEIJING — Chinese people watching American television series are exposed to an enviable image of an average middle class American family. Bound for a leafy neighborhood in the suburbs, a Chevrolet leaves the bustling city and rolls into the driveway of a wooden home on a quiet street. Two or three kids are playing on the lawn, and an elegant woman walks outside to give a hug and kiss to her man on coming home.

Like their peers in America, China also features a demographic that is well-educated, works a stable job and has a family. They own their own hous, possess strong expertise and professionalism, and have a certain household spending power.

According to Wacai.com, an online banking platform, in China, a person classified as middle class is an adult under 45 years old, with invested financial assets of between 150,000 and 2 million RMB ($22,000 to $299,000), whose food spending accounts for less than 30% of total household expenditure. It's estimated that China currently has 180 million such people, accounting for 13% of its population.

However, when it comes down to real life, many of China's middle class feel that they are far behind their U.S. peers, who seem to be enjoying their lives in a much more leisurely way.

One recent Chinese post on the Internet said: "I'm a white-collar city person. I'm called middle class and I have a life many others envy. Yet I'm always anxious. I worry that I may be laid off tomorrow. Though I am healthy today, will I become poor if I have a serious illness one day? How much further can I climb up? And who will support my old age? One big-scale layoff, a possible pay cut, a fluctuation of the stock market, an adjustment of the tax rate or even just the housing subsidy fund can keep me up at night."

In a traditional definition, "middle class" means the part of population midway up the social pyramid. They are those who are mostly engaged in white-collar work, and are well-educated, with a stronger vocational ability, as well as corresponding household purchasing power. They also have more time to pursue leisure activities and travel associated with an elevated "quality of life."

Among all these measures, the pursuit of leisure is probably the most unattainable. Today in China, social resources are certainly not concentrated in the hands of the middle class, but the middle class are trapped between the upper and lower classes. In other words, it's a zero-sum game in which the middle class strive in an extremely intense competition, and try desperately hard to climb the ladder of success at risk of sliding down to the bottom of society.

Compared with a decade ago when middle-class Chinese were significantly better off than the working class, and were able to enjoy more leisure time, as the Chinese economy developed these people are gradually losing what they used to have.

Due to the slowdown of the Chinese economy and the tightening of various government policies, the majority of China's middle class are transiting from a leisured class to a group who mostly find themselves working overtime. The pressure comes from mortgages, education costs, health care, social security and rising living expenses, limiting free time and extending working hours to make ends meet.

There are pertinent questions raised by Japanese economist and corporate strategist Kenichi Ohmae in his M-Form Society theory, referring to a polarized society with extreme rich and extreme poor: Does your housing loan create tremendous pressure? Do you dare not get married or raise children because of your economic situation? Do you worry for your children's education? As long as your answer of one of these questions is yes, then you are not a bonafide member of the middle class, but what we call the "sandwich class."

Root of anxiety

By some estimates, to be a Chinese middle class not facing constant stress, one must have cash deposits of at least 5.5 million RMB ($822,000). This is not at all realistic for most of those who nonetheless think of themselves as middle-income.

But when you ask them, they are indeed worried about the potential spending in the years to come: children's education, savings for medical care and a pension, the cost of their children's marriage, personal career training, as well as car or house replacement.

China is the world's largest developing country, and as such lacks of fully established welfare state. Most daily needs are to be assumed by families themselves and thus a serious illness or an incident in life can suddenly make people very vulnerable.

For China, a stable middle class will be the key in determining whether the country will move towards a consumption-driven society that achieves social stability. It will be imperative to improve the welfare system and social security so that most working people are truly well-off, able to enjoy leisure time and dare to partake in the national consumption that can form the county's backbone.

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