Catching Up? China's Urban Middle Class Reaches 230 Million

Editors note: This is a translated and edited version of an article from the Chinese publication Economic Information Daily. It discusses a report recently published by the Chinese Academy of Social Sciences (CASS), which claimed that China’s urban areas, while still facing some rich-poor gap related problems, are projected to achieve a primarily middle class population makeup by 2025. A second article,also from the same URL above, then “lightly” questions the validity of this data.

A Look at the Numbers

On August 3rd, the Center for Urban Development and Environment at Chinese Academy of Social Sciences (CASS) published the "Report on China's Urban Development #4 – Focus on People’s Livelihood". According to the report, in 2009, there were 621.8 million people living in “urban” areas, with an average annual income of 17,175 RMB. The size of China’s urban middle class was about 230 million people, or 37% of the total urban population. Yet, at the same time the size of the urban lower class was still quite large. The poverty line for urban areas is drawn at an annual income of 7,500-8,500 RMB. Using this definition of “poverty”, nationwide data from 2009 shows that there are about 50 million low class people living below the poverty line in urban areas, or roughly 7-8% of the total urban population.

Within the ten-year period from 2000 to 2009, the size of the urban middle class increased at an average of 3.8% annually. However, comparatively the size of the middle class in Beijing and Shanghai was larger, which is not that surprising as they are arguably the two most developed cities in the country (Beijing = 46% and Shanghai = 38%).

But the cause of the discrepancy between these two cities and the rest of the Chinese urban areas is not universally agreed on. The report noted that these numbers don’t mean that average income in these two metropolises is that much higher, simply that the size of their middle class is larger. Others disagree. The report also noted that, even though there has been an overall declining trend in the size of the lower-middle class in urban areas, it is still quite large; since 2005 it has accounted for nearly 60% of the urban population. At the same time, the proportional size of the urban upper class has slowly increased, not quite exceeding 10% of urban dwellers. (Editors note: in the original article no clear definition was given for what constitutes “lower middle class” or “upper class”)

The upper class living large. Photo: blogs.forbes

In search of a Balanced Social Structure (The “Chinese olive”)

As the country continues to rapidly develop, the Chinese government hopes to achieve an “olive shaped” social structure; that is to say, it wants Chinese society to resemble a round olive where the middle class is the wide middle section, and the two, relatively smaller ends are the upper and lower classes. But as the report illustrates, these class proportions have yet to be achieved. However, the report predicts that between 2010 and 2025, the size of the Chinese urban middle class will continue to increase 2.3% annually, and by 2020, 47% of the total urban population should be middle class. If everything goes according to plan, by 2023 it might finally hit the 50% middle class target, and the "big middle, two small ends" or "Chinese olive" social structure will be achieved.

China’s Current Class Distribution

(Editors note: info taken from approximations by the Chinese government so numbers might not exactly match 100%. In particular there is some undefined overlap between middle class and lower middle class.)

Urban Upper Class: ~10% 
Urban Middle Class:  37% 
Urban Lower-Middle Class: between 50-60%
Urban Lower Class: 7-8%,  
= ~100%

What is the Definition of Poor?

Chen Huai, the Director of the Department of Housing and Urban Policy Research Center believes that the CASS data is "clearly a conservative estimate". He points out that the recently published 2010 census data estimated that there are 660 million people living in urban areas in China, and that the fifty million lower class number (7-8% of urban population) is a low estimate.

The urban poor. Photo: china-mike

More to the point, Chen Huai explains that, the basic concept of what “being poor in China” is has dramatically changed in the past 20 years. Once, being warmly dressed and well fed was still considered "poor", especially before the Opening Policy of the early 1980s, pretty much everyone in China was considered poor, (if not equal). Under the planned economy (of the Mao era and the early reform years), the income for the majority of people would have placed them in the “lower class” category. But now, the definition of poor is nothing like that. Poor should now be defined as “unable to meet the basic needs”, like, affording medical treatments, sending your kids to school, etc. In recent years, people living lower than the median income level has been increasing, which is a big reason for the growing lower class. Also, as standards of living improve, the middle class may be growing, but it is also clear that this lower class is largely being left behind. Simply put, the following statements appear to be relatively accurate: the total urban population is growing, the urban middle class is growing, but the urban lower class is growing too, while at the same time getting progressively poorer with a worsening standard of living compared to the middle and upper classes.

Proportional disparity in different regions of China

In line with the above reasoning, we can also see that certain regions of China are largely being left out of the rapid middle class growth that is occurring on its eastern seaboard. Data from the report shows that different regions of the country have larger proportions of lower class people. The eastern region has 7.56 million urban lower class people, the central region has 16.57 million, the western region has 17.17 million, and the northeastern region has 8.45 million. The Midwest accounts for two-thirds of the total urban poor in China.

Therefore, what the true population of the middle class and people still living in poverty is in China remains to be seen.
 

Source: news.sohu.com
 

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