I first looked at this economic phenomenon over five years ago, back in September/October 2011, and it’s probably worth looking at what I said back then before making comment on what’s been happening in those five years. One thing is for sure, China is a lot richer, and a lot more powerful than they were back then. Their rate of growth may have slowed, but it’s still something we in the West might be envious of. So let’s look at the three blogs I wrote back then and then see how things have changed.
Middle Class China – Take One [Monday 12th September 2011]
There are a number of things about our current worldwide social system that are new, but few that will affect us quite so dramatically – and quickly – as the rise of China’s brand new Middle Class.
I want to spend a few moments looking at the situation, to try and analyse just what’s actually happening and what it means to us in the West. Because this shit is important, as they say. If you live in the UK it is certainly more important than anything going on in our own economy. Not that we’ve ever been able to separate that from the fortunes of the world, but … these days the world economy is actually a world economy.
So when did this phenomenon begin?
We can probably trace it back to the mid-to-late eighties, when a lot of state run industries were closed down and then often re-opened with the same managers and workers, only with the managers having somehow gained control of all the assets. It was a good time, it seems, to have been a party member, and this division of the spoils (not unlike what happened in Russia just a decade later) led to a small, but rich and contented Middle Class that- -owing to its previous close links to the State – were very keen to maintain the status quo.
A more genuine Middle Class – entrepreneurs of the rags-to-riches kind, emergent not from the state but from the great economic boom that swept China in the last fifteen years or so – can probably be traced back to the turn of this century.
And how would we define them?
Basically, the new Middle Class are professionals and successful entrepreneurs who are earning, on average, 5000 remnibi (yuan) a month. In PPP terms (purchasing power parity) this equates to roughly US$1400 per month. Not a lot by comparison to western standards but certainly enough to make their lives very different from the rural poor who still make up a billion or so in modern China.
Right now, it’s estimated, those defined as Middle Class (that is, earning a minimum of 5,000 RMB and anything up to 20,000 RMB) total 125 million, a figure which is escalating year by year. Helen Chang, author of THE CHINESE DREAM, reckons that figure will reach 800 million by 2025. If so, that will be twice the size of the whole of the West’s Middle Classes.
This new Chinese Middle Class is by no means a slavish copy of what we have in the West, even if what we see on our news reports seems highly familiar, for whilst they believe in social mobility – believing that, through their own efforts, they can change and improve their lives – at the same time they see their sudden emergence as incredibly precarious. One almighty crash and it could all disappear – in the wink of an eye. Thus there’s a certain insecurity about them that the West, perhaps, does not possess. This is all very new to the Chinese. And, bearing in mind the history of the CCP in the last ninety years, there are many who wonder whether the State will step in at some point and call a halt. Particularly if political pressure for governmental change comes through the newly-affluent Middle Class.
So what does the Middle Class in China want?
Materially this is a very easy one to answer. In the last ten years or so, one highly recognisable Western trait had shown up among the Chinese Middle Classes – conspicuous consumption. Chinese people want the latest status symbol. Just as much as the Americans did in the 1950s and 60s, the newly-affluent in China want luxury goods to impress their friends and neighbours, their relatives and colleagues. A big house. A car, Good education at the best schools for their children. Malt whisky and good steak. Diamond rings and gold jewellery. And whatever luxury item is the rage that month. The costlier the better.
All of this is driven, it seems, by the very precariousness most Chinese feel about their great economic leap forward. They want everyone to see how well they are doing – that they are on their way up, not scrimping and saving to make ends meet. And business predictions are that, in the wake of this first great boom in luxury goods, service industries will be next, with banking and healthcare at the top of the must-have list.
And what does the CCP (the Chinese Communist Party) think of this?
Let me quote Tom Doctoroff, JWT (J Walter Thompson’s) North Asia Director:
“The Chinese have an extraordinary ambivalent relationship with the State; they see the central government as there for them to advance and to make order from chaos. They would never trade in the Chinese system for democracy. On the other hand there is a frustration with the slow pace of reform and evolution of a structure that should protect the interests of society. Everyone wants institutional reform, but no one wants rebellion, they want a continuation of the status quo; the State is the lynch pin that holds society together … people see corruption as the government not being responsive to their needs. But people need their strong government as they still have an underlying fear that things could fall apart at any moment.”
I think that’s true. The Chinese are less individualistic than us. Only they’re getting a little taster of the freedom that comes along with consumerism and capitalism, and once a significant number of them – a large number of whom are likely to be future policy-makers – have been to College in the West, then things might begin to change.
Right now everything is new, and the only way the Chinese can respond is in a Chinese fashion, all of their hard work underpinned by a strong sense of caution. But what will things be like twenty years from now, when China is top dog and the sons and daughters of the (now) newly rich come of age? Will they still be fearful? Will they still be cowered by a government which, even now, hasn’t quite got a handle on the new technology and how to control what is shown and said ‘on—line’.
The old ways, you see, are dying fast. The Wenzhou high-speed train crash showed us that. Change, when it comes in China, will, I think, be slow and gradual, but it is coming and it will be transformational. China’s laws are, even as we speak, being rewritten, so that Westerners are encouraged to come and trade without the fear of being unprotected by China’s courts. And this is only one of many areas in which things will improve in China, thanks to the emergent Middle Class.
However, let me quote one more source. This is from National Geographic back in May 2008 which I feel captures better than anything how it must feel right now to be part of that emergence –
“For China’s emerging middle class, this is an age of aspiration – but also a time of anxiety. Opportunities have multiplied, but each one brings pressure to take part and not lose out, and every acquisition seems to come ready-wrapped in disappointment that it isn’t something newer or better. An apartment that was renovated a few years ago looks dated; a mobile phone without a video camera and colour screen is an embarrassment. Classes in colloquial English are fashionable among Shanghai schoolchildren, but everything costs money.
Freedom is not always liberating for people who grew up in a stable socialist society; sometimes it feels like a never ending struggle not to fall behind. A study has shown that 45% of Chinese urban residents are at health risk due to stress, with the highest rates among high school students.”
I’m going to return to this subject a few more times this week, so please respond. For all we’ve talked about other aspects of the situation, this, I feel, is the key. If we can persuade the Chinese that they’d like to partake of a world which, to all intents and purposes, is Western (not worrying necessarily who’ll be in control of that world) then maybe we’ll have that soft-landing that everyone hopes for. It’s when, having sampled the goods in the store, they decide to turn their back on it, then I for one will be looking for a bolt-hole somewhere. And maybe go and write a novel or two about it.
Ten days later I returned to the subject, taking a slightly different tack.
Middle Class China – Take Two [Thursday, 22nd September 2011]
It’s that time of year when the kids are finally back at school, after the long summer break, and, because I have the task of delivering my youngest, Francesca, to her sixth form college in Camden every morning, I’ve noted – quite literally ‘in passing’ – that one of the new student accommodation blocks built in Market Road, seems to cater almost exclusively for young Chinese students. This is, I feel, a global phenomenon finally coming very close to home, because I imagine that all over the United Kingdom, and in the USA and Europe, too, a lot of new Chinese students have, in these last few days, had their first taste of real Western life, and I pray that they’re enjoying it.
The sight of smiling Chinese faces on the streets of Islington, rather than sending me into a paranoid state, actually cheers me immensely, because, as I’ve argued before and will continue to argue, the exposure of the young Chinese Middle Classes to Western values is, perhaps, going to be the saviour of us all. Think a moment. When Germany was a threat to us, did we have hundreds of thousands of young Nazis filling our colleges? No, and ditto for the Russians. On all previous occasions where we’ve had a major ‘rival’ in world politics, we and they (US and THEM) have kept ourselves strictly to ourselves. But this time…
Put simply, it’s an unique historical phenomenon. And one which, I guess, has proved a great risk for the Nine Men and the CCP itself, because while their young citizens re over here, they can do what they like, see what they want to see, and say what they want. The Chinese have sent their children abroad TO LEARN FROM US. And it won’t just be the fashions and the music that they’ll return to China with a love of. They’ll be taking home new values, new ideas, new ways of seeing the world, and that has just got to change the very nature of what happens next in China.
Thus far the Politburo have kept their great Capitalist-Communist experiment going very successfully, almost without a hitch (if you don’t count Tiananmen as a hitch),but at some stage the fact that so many of their young intelligentsia have experienced the Western lifestyle (the genuine thing and not just the ‘style’ copy you can buy in Beijing or Shanghai) is going to have an enormous effect. It really cannot fail to. Not without one almighty purge. And though the last is possible – we’ve seen it in the past – I don’t think that even they, our Nine Men, want that any more. Control freaks they might be, but insane they’re not.
Because the fact is, China will achieve world domination without necessarily going through the scenario I describe in my books. They’re big enough and clever enough and – most important of all – efficient enough to win economic and military supremacy without having to resort to heavy-handed tactics. Oh, they may do that for the sheer heck of it, to ruffle a few Western feathers, but I don’t think we’ll be fighting a major war against them. Not in the next ten or twenty years, anyway,
Okay. But there’s one slight snag re the above. That argument is assuming that the large majority of young Chinese will return home, back to mainland China, and throw their efforts into the national cause.
Let me quote you two facts that puncture that assumption. First of all, this year  it’s been estimated that 1.27 million young Chinese will be studying abroad. Most of these – ninety three per cent! – are privately funded; that is, paid for by their families. And the number currently returning to China having got their qualifications?
Bear with me. There’s a conflict here between what some people claim and what the Chinese government claims. But then, isn’t that always the case? The Chinese government claims that something like 27 per cent return home once their studies are finished. And other sources?
Other sources claim that that figure is closer to 13 per cent. Which, when applied to that 1,27 million who have looked to the West for their education, would mean a paltry 165,000 returning home, while a staggering 1.1 million will stay in the West, making their homes here.
Now, for once I would guess that the government figure is closer to the truth, if only because they’ve been so open about the problem of returnees. By their calculations, over the las 30 years, more than 630,000 students have returned, one fifth of that total in the last years alone. And one can see why. Whereas only ten years ago the standard of living in the West was incomparably better than in China, the gap has narrowed and – I’d imagine – when a qualified student weighs up his or her options now, returning to China – to share in that great economic boom – isn’t so onerous a choice. Why stay in the declining West when you can share in the great economic leap forward?
One reason and one reason only. Freedom. Freedom of expression particularly. It’d the one thing the Nine Men can’t give them as of now. Everything else, sure – all of the material stuff. Butt freedom, democracy, human rights … No. They’re not ever going to be part of the deal. Not in the short term, anyway. Which is why, at the same time that I understand why so many stay on in the West once they’ve finished their degrees, I wish more of them – maybe fifty per cent? – were heading home to make those small and subtle changes that China has to make if we’re to have long term stability.
China’s Middle Class – Take Three [Friday 21st October 2011]
A month’s gone by since I last talked about what’s happening in China as relating to their emergent Middle Class, but I just wanted to look at it again in the light of what’s been happening on the world’s markets. Are there nothing but dark clouds ahead, or are the Chinese actually going to do something to make things better? I ask this because if we suffer, they, ultimately, will also suffer. So it’s clearly in their best interests – if they wish to continue with the boom years – to help us solve our problems … seeing as we in the West are their major market.
Or is that so? Will China, at some stage, become self sufficient in terms of trade? Having made their pile, will they then be content to buy goods off themselves, from their own markets, or do we still have something to offer them?
Well, let’s consider the size of China’s Middle Classes. At present the figure is roughly about 300 million according to China expert Helen Wang, but one recent estimate has claimed that that figure will soar, by 2025, to something approximating 800 million! Add that to the number of emergent middle class consumers in India (estimated at slightly over 500 million) and you have a whole new economic picture, where scarcity of raw materials will be one of the major factors.
World-wide inflation is, therefore, a condition of this emergence. A new factor to be added in to the global economic equation. As demands for raw materials rises, so too will prices. And this – in global terms – is something new. It could be healthy (if we can solve the problem) or very unhealthy if we don’t.
So what – right now – are the Chinese buying? Luxury goods (cartier watches, single malt whisky, designer clothes), financial services, insurance, flash cars. In fact, anything they can’t produce or reproduce themselves. And that’s good news for us. But it all seems like one giant juggling act and the big question is will we drop just one or two balls (Greece, for instance) or the whole damn lot?
Whenever I see anything on TV about the current global economic crisis, I wait – with bated breath – for some mention of China’s role kin all of this, but nine times out of ten it’s not even mentioned.
It’s another instance of our West-O-Centric view of the world. Our sleepwalking act that could well prove disastrous in the years to come. Because we can’t ignore China (or India) any more, because ten years from now they’ll be calling the shots. And they know that. I often wonder if that’s why they’re allowing the current crisis to stagger along from week to week – just to rub our noses in it. Or maybe to make us feel grateful (indebted?) when they step in to bail us all out.
China’s position is a strange one, actually. For once it’s quite unique in history. Why? Because before the boom there was a little thing called the ‘One Child Policy’ and that has had an enormous effect on attitudes in China. Their characteristic humility has been replaced by a completely new phenomenon, that of ‘the little emperor’. In fact, the Chinese are living through the age of ‘little emperors’, of children who have been brought up to be the singular focus of their parents’ (and grandparents’) lives. Children who have thus been spoiled rotten and who have always got their own way. When this is combined with having a powerful father (maybe in the CCP) then it can, some say has resulted in an arrogant young elite who believe themselves completely above the law.
These are the dangerous ones – the ones we in the West should fear.
And even though, on the Chinese media, instances where some rich official’s son has got into trouble (for being an arrogant little pratt, basically) are condemned by the majority of the population, these self-serving little shits are going to be in charge one of these days – bringing their one-child attitudes with them. So beware, This is the (selfish) human face to the statistics.
Okay. One more estimate before moving on. Forbes reckon that China’s consumer market will reach $16 trillion by 2020, overtaking the USA as the largest consumer market in the world. Which is around about the time that the Chinese will have taken over nearby space (from the USA), developed a bigger military (spending more money than the USA), and generally ousted all of its rivals in every sphere you look at. Putting it starkly, The Age of China is nine years away – tops! So go buy your course in Mandarin now and prepare for the years of decline.
Tomorrow. More sunny news from the far side of the globe. A laugh, a joke… Hell, I don’t make these things up. They simply are.
And so we move on, travelling forward five years. To today. To June 2017, and a world where Donald Trump is – in what seems like some weird drug dream – President of the United States Of America.
As you can see, reading about how things were and predicting how they’d probably be from where we sat on the mountain-top just five brief years back, there was quite a lot to think about.
Much has turned out just like I said it would, with the inexorable growth of the Middle Class at the centre of it all. But the key two buzz-words, predicted but as yet un-named in those three thought-provoking blogs – a term that you’ll these days find on every Chinese citizen’s lips – is this.
Okay, you’re asking, so what the hell is Generation Two?
It’s simple enough. Generation One were those party officials and chancers and rags-to-riches entrepreneurs who, in the early decades of China’s emergence, were responsible for growing the economy and elevating hundreds of millions of Chinese citizens out of poverty. Middle Class men (and women) who, despite making huge fortunes in those heady days of China’s special blend of Communist-Capitalism, were nevertheless haunted by the ghosts of Tiananmen and, decades before that, the social madness that was Chairman Mao’s Cultural Revolution.
Citizens who, subsequently, proved to be nervous, fearful, constantly stressed at all times, and never – never ever – certain of their gains, marked inwardly as they were by the common fear that things could fall apart at any moment; that their hard-earned stability might tumble once more into chaos.
Okay. Fast forward to the sons and daughters of that fearful First Generation, to a vast swathe of younger men and women who feel little of the anxiety their parents and grandparents experienced. Brash, confident, patriotic, their experience of life has been completely different from that of their forbears.
This is Generation Two. The new China, born not out of rural hardship but from the very heart of the newly-affluent Middle Classes. Hard-working, opportunistic, aspirational, there is a totally new spirit to them, a sense of their new, much-advanced position in the world; a ‘fact’, confirmed by China’s rapid rise from Third World power to – in a matter of a decade at most – World Domination.
And the most surprising thing in all of this is that China, in its long history, has never really had a Middle Class. At least, not one which, as all the experts predict, will ultimately include near on three quarters of China’s population – that’s 900 million consumers!
As Dominic Barton says in his article on the subject (published by McKinsey & Company):
“China’s new middle class also divides into different generations, the most striking of which we call Generation 2 (G2). It comprised nearly 200 million consumers in 2012 and accounted for 15 per cent of urban consumption. In ten years’ time, their share of urban consumer demand should more than double, to 35 per cent. By then G2 consumers will be almost three times as numerous as the baby-boomer population that has been shaping US consumption for years.
These G2 consumers today are typically teenagers and people in their early twenties, born after the mid-1980s and raised in a period of relative abundance. Their parents, who lived through years of shortage, focused primarily on building economic security.”
It is from this latter heartland of respectability and cautious aspiration that new modes of behaviour – genuinely Middle Class modes – are slowly being developed. And as they are, so China is, in its limited fashion, being politicised, to deal with, say, the threats of pollution and corrupt officialdom, among other things.
I’ll blog on that separately sometime soon, but for now let me reiterate my belief that in these days of a true world economy – and praying that said Donald Trump won’t be stupid enough to embrace a protectionist policy with the rest of that world – then we ought to be looking to China as the key to our own economic success. I mean, that’s one hell of a massive market they are opening up and it will be some time, I believe, before they have the capacity to service it all.