What is “middle class” in China?

The article “What Is Middle Class in Manhattan?” in the New York Times took me back to my thoughts on the middle class in China last year. Maybe China is kind of like a blown up version of the Manhattan portrayed in the NYT article, in the sense that nominal income alone won’t tell you much about how someone lives, what their values are, and how their life will turn out, because rapid inflation, especially in real estate prices, have thrown everything out of whack.

This argument below taken from the NYT article almost echoes exactly my thoughts on China, based on extensive travels to China’s mega-cities, suburbs, townships, counties, and even villages in 2012.

An intriguing definition of what helps a person gain entry to the Manhattan middle class was ventured by Jonathan Bowles, the executive director of the Center for an Urban Future, who issued an in-depth report in 2009 that examined the city’s changing class dynamics. “Understanding who is middle class, in New York, but especially Manhattan, is all about when you got into the real estate market,” he said. “If you bought an apartment prior to 2000, or have long been in a rent-stabilized apartment, you could probably be a teacher in Manhattan and be solidly middle class. But if you bought or started renting in a market-rate apartment over the last 5 or 10 years, you could probably be a management consultant and barely have any savings.”

What I found in China last year is that a couple that each makes RMB 6000 (call it $1000) a month in China living in a small city where their family is from probably had their parents buy them a home years ago (no mortgage), free baby care and housekeeping from their relatives (this could run up to $90k a year if you live in a city like San Francisco and have a legal nanny), a car that they might not have paid for themselves (it’s customary for men’s families to provide all the “hard goods” in ordr to attract a serious girlfriend / wife in this day and age), and other communal / cultural non-monetary subsidies. This couple could spend as little as 10-20% of their income on life necessities and has more room for disposable spending (say on imported cosmetics or relatively “expensive” clothing / accessories) than their wages alone suggest.

Contrast that with elite white collars in Beijing, say at an ad agency, making ~RMB 20-25,000 (~$4000) a month. If they’re not from Beijing they’re probably paying rent to the tune of at least RMB 1000 per person, eating out a lot at overpriced restaurants if their parents haven’t moved from the hometown to come help with babysitting or housekeeping, and the possibility of ever owning a home (heck, even neighborhoods around the 5th Ring Road are considered unaffordable now) in the big city seems very remote. On paper, this tier 1 city office worker should be doing better than the small city worker, but reality is more nuanced than that. After all, the terms “yueguangzu” (zero monthly savings) and “daotie” (reverse subsidy, by parents to kids) didn’t come out of nowhere!

What I learned in rural areas was most interesting. Because many rural residents were allocated land in the land reform process over the last few decades (urban Chinese don’t own the land, even if they buy the apartment it’s just a leasehold), some have done quite well, by selling land early to developers and reinvesting in property, or buying into other small businesses, like taxi licenses (whose prices have gone up 7x in the last 10 years in one small city I visited). I know there are countless cases where land ownership and land sales haven’t worked out fairly for peasants, but given how much coverage these issues get I think it’s fair to point out the other economic reality too. That timing and property or land ownership can make or break one’s class status in China today.

Instead of assessing “class” on the basis of nominal income or people’s place of residence – as most China watches do – I have started thinking about Chinese people as being either part of the new “have’s” camp or the “have’s not” camp. You’d be surprised at who falls into each camp! This partly explains the mystery of why my old neighbors from the village where I was born started asking me to bring back Dolce & Gabana handbags worth a few thousands dollars from overseas in the 1990s and why I, living in Beijing and working an “elite” white collar job, still feel like those luxuries are unaffordable (or incongruous with my middle class values).

That’s the income bit of the “class question” for now. As for values, I think I’ll address that in a separate post. More on this topic to come…

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