Some face unstable jobs and risk falling out of the middle-income group
Although there is no definition of middle class in China, the commonly used phrase for middle income group is defined by the National Bureau of Statistics as a family of three earning between 100,000 yuan (US$14,000) and 500,000 yuan annually. .
In a rare warning, an editorial commentary in the state-run Economic Daily newspaper last month pointed to the risk of decline in the middle-income group, and called for “necessity and urgency” to boost its growth.
“Middle-income groups are of great importance for economic growth, social stability, and confronting external challenges,” the commentary published on December 27 said.
“But the bulk of the groups belong to the lower middle income bracket. Some face precarious jobs and risk being dropped out of the middle income category.”
China said it has about 400 million middle-income earners, or 140 million families, constituting about 30 percent of its population of 1.4 billion people.
Wang Yiming, a policy advisor to the Chinese central bank, said that a large proportion of the group is still close to the minimum, which calls for policy support to increase their incomes and enhance their sense of gains.
“The majority of the group has just crossed the middle income threshold. This group is among the most vulnerable to economic shocks, such as the pandemic, which could affect their income and jobs,” the former deputy director of the Development Research Center of the State Council said in an interview with state-backed broadcaster CCTV. .Advance this month.
It is difficult for me to move into a new sector as a middle-aged man
Lee, a sales executive who turned 40 last year, was laid off two weeks ago when his employer, a content management site, downsized its marketing department.
“I will suffer losses from anything I invest in,” said Lee, who only provided his surname due to the sensitivity of the issue. “It is not easy to find a new job at the current salary level.”
“It’s difficult for me to transition into a new sector as a middle-aged man,” added Lee, who said his income was mainly used to pay a mortgage, a car loan and a personal loan for his family of four.
‘No one dares to spend’: Why China’s middle class is tightening its belt
‘No one dares to spend’: Why China’s middle class is tightening its belt
The average one-year expected return for online wealth management products was 2.79 percent in the second week of 2024, down from 4.41 percent nearly two years ago, according to Chinese data provider Wind.
China’s property sales by floor area fell by 8.5% in 2023 to 112 million square meters (1.2 billion square feet), reaching their lowest level in a decade.
Winnie Liu, a director at a foreign-invested company in Shenzhen, bought a one-bedroom apartment in 2015 for investment, which is seen as the most preferable way of wealth accumulation for Chinese families.
I certainly hope there won’t be another big drop this year
The price peaked at 6.3 million yuan (882,000 US dollars) in 2021, but fell to less than 4 million yuan.
“My assets have shrunk a lot over the past two years, whether from real estate or financial investments,” Liu said.
“I certainly hope there won’t be another big drop this year.”
But even though she also lost about 40 percent of her investments in the local stock market last year, Liu still considers herself lucky compared to those who invested in real estate after 2018.
“A lot of them are starting to become passive asset holders,” Liu added.
A survey of the middle class group between the ages of 31 and 40, conducted by financial and economic writer Wu Xiaobo, indicated that wealth growth slowed last year, which led to increased reluctance to spend.
Nearly half of the people surveyed had an annual personal pre-tax income of between 200,000 yuan (US$28,000) and 500,000 yuan, and household assets of between 3 million yuan and 10 million yuan.
The Chinese middle class is shunning luxury spending amid murky expectations
The Chinese middle class is shunning luxury spending amid murky expectations
According to Wu’s report, 11.4 percent of middle-class families reported that their wealth shrank by more than 30 percent last year, with 28.9 percent citing a wealth decline of between 10 and 30 percent.
Only 24.8 percent said their wealth increased in 2023, compared to 29 percent a year ago and 55 percent in 2021, according to the white paper.
He has been unable to break even for the past six years, having opened a kindergarten in his hometown in central Henan province after being laid off by a technology company in Shenzhen.
Better income is no longer a given. We need to work harder to keep the middle class alive
“Previously, we were charging 15,000 yuan per year for each child, but later we had to reduce this amount to 10,000 yuan as many parents’ incomes declined. “We were also charged hundreds of thousands of yuan in bank loans,” said Huang, who also owes hundreds of thousands of yuan in bank loans. From friends and relatives: “Even then, the enrollment rate is nowhere near what it used to be.”
Huang returned to Shenzhen last summer and received an offer from a Chinese company to work abroad for a lower salary.
“Better income is no longer a given. We need to work harder to maintain middle-class living,” he said.
The US-based Pew Research Center said in 2021 that because of the coronavirus, China’s middle-income class would likely fall by 10 million in 2020, although the decline represents only a small share of the 504 million who were in the middle class. Before the crisis. pandemic.
Pew estimated that 247 million people moved into the middle-income bracket in China in the 2000s, when the upper-middle-income population nearly quadrupled from 60 million to 234 million.
Research by the Center for Strategic and International Studies (CSIS) in 2021 said China’s middle-income group swelled to nearly 707 million in 2018, or 50.8 percent of the population.
The Center for Strategic and International Studies said most of the growth occurred within the lower middle income category, with 68 percent of the middle class falling into the middle class in 2018, compared to 18 percent in Sweden.
Household wealth and income have continued to improve, but the recovery remains weak, according to the third-quarter Chinese household finance survey conducted by the China Household Finance Research and Survey Center at Southwest University of Finance and Economics.
Total household liabilities continued to increase in the third quarter of last year, while the rate of returns from wealth management products fell to minus 0.3 percent, worse than minus 0.1 percent in the previous three months, the survey said.
But the sub-index for household wealth and income expectations stood at 102.1, the second lowest reading since the second quarter of 2020.
The sub-index measuring employment expectations also remained below 100 – representing a contraction – for the third straight quarter despite the slight improvement.
Reducing consumption is the solution
Pianos are the latest to suffer underspending within the middle class. Sales rose, especially in Beijing and Shanghai, but a number of merchants and stores were forced to close their doors last year.
According to a report by Chinese digital media Jiemian News last week, sales have been declining since April last year, falling to about 15 percent of the peak in 2019.
“Reducing consumption is the right way. I used to shop for affordable luxury brands a lot. Now I only choose national brands for myself and my family,” Liu added in Shenzhen.