China / The Rumored Middle Class

Rumors of a rising Chinese middle class have been touted widely. However, the evidence supporting these claims remains conflicting at best. The “middle-class” jobs outsourced from the United States have not necessarily translated to “middle-class” jobs in developing nations, especially in China. Defining the middle class has always been a difficult venture, but on several fronts the Chinese middle class remains nascent.

Using wages as an indicator, the manufacturing jobs in China fall far short of providing a middle-class lifestyle. The China Daily reports that the average manufacturing wage in Shanghai in 2008 was 42,311 yuan ($6,723) annually, the highest in the country. The same article also listed annual wages in other parts of China (excluding Beijing and Shanghai, where the cost of living spikes) at roughly 19,500 ($3,098) to 25,000 yuan ($3,972) annually. Even in Shanghai, these wages are below middle-class.

A 2005 study conducted by the State Statistics Bureau of the Chinese government used an income range of 60,000 ($9,534) to 500,000 yuan ($79,444) for a three-member household as the primary determinant of middle-class status. This report places factory workers at far below middle-class status, or possibly at the bottom, for a two-income household, and calculated only roughly 20 percent of the Chinese population as middle-class (to be sure, this report has received some criticism by Cheng Li of the Brookings Institute). And while wages are rising, they won’t reach middle class wages any time soon. For example, Foxconn Technology, which makes an estimated 40 percent of the world’s consumer electronics, recently raised its wages to about 2,200 yuan per month ($350) after a rash of suicides and bad press. Even at these increased wages, workers lack the human capital, access to healthcare or education, and consumer behavior that are generally indicators of a middle class. Moreover, the salaries at Foxconn are likely higher than other manufacturers that are less assiduously monitored by the press. Migrant workers, many of whom work in these “outsourced” factories, averaged about 1,690 yuan ($266.86) per month in income.

Perhaps a more important indicator of middle-class status is consumption behavior. A rising consumer class in China would drive economic growth and could also balance some of the trade deficit with the United States. The emergence of such a class would augur well for China’s purported goal of transforming its industrial manufacturing economy into a knowledge and services economy. However, a 2010 OECD report using consumption as an indicator found that the Chinese middle class constituted only 12 percent of the population. This is simply not large enough to drive the shift from a manufacturing-export economy to an innovation economy.

Choosen excerpts by Job Market Monitor from

via China’s Missing Middle Class – Analysis Eurasia Review.