Two camps are emerging with mutual exclusive opinions – at least we think – about China’s emerging middle class. Shaun Rein, author
of The End of Cheap China: Economic and Cultural Trends that will Disrupt the World, argues in Bloomberg it takes at least a decade before it justifies heavy investments of foreign retailers.
At some point, perhaps 10 years from now as it becomes impossible for China to sustain fast-paced growth, China’s middle class will truly be middle class in their aspirations and economic potential, and brands will be able to emphasize a middling heritage. Until then, however, there are far more similarities with Indian and Russian consumers, who spend for luxury for some products but are price sensitive on others.
And it could take longer, as spending power of the aspiring Chinese middle class went actually down in the past two, three years, despite wage increases, because of inflation and low interest rates.
I define middle class as households with an annual income of between $10,000 and $60,000 U.S. dollars. But income is a little misleading because the cost of living in China is very different. A rule of thumb is a household with a third of its income for discretionary spending is considered middle class.
In China, the middle class is all concentrated in big cities, not like in this country, where a lot of the middle class are in the suburbs. Most people have a college education and relatively stable jobs. There are a lot of entrepreneurs and a lot of white collar workers, working for multinationals or state-owned companies.
They are a lot younger … 20 to 50. A lot of them own homes. Like Westerners, they want everything Americans have.
Helen Wang estimates the size of the middle class is around 300 million Chinese.
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