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Monday, 30 August 2010

Class Sizes

A report by the Asian Development Bank (ADB) published recently has found that the size of China's middle class is now over 800 million people. ADB researchers defined 'middle class' as individuals who consumed between 2 and 20 US dollars per day, with the bracket further divided into the 'lower-middle class' (2 to 4 dollars per day), the 'middle-middle class' (4 to 10 dollars per day) and the 'upper-middle class' (10 to 20 dollars per day). Importantly, those in the lower-middle class were still liable to lapse back into poverty in times of hardship.

Perhaps unsurprisingly, Chinese academics have taken issue with the ADB's findings, with the Chinese Academy of Social Sciences contending that the figure for China's middle class in fact stands at around 23% of China's population (roughly 300 million people). However, an important concession by the ADB made in the report is that around 40% of those encompassed in its figure of 800 million continue to belong to the 'lower-middle class' category.

What do these findings suggest about China's development? Firstly, it is important to get some perspective. As the report stresses, the limits on the upper-middle class threshold of 10 and 20 dollars are equivalent to the poverty lines of Brazil and Italy respectively. In terms of GDP, it is clear that China still has a long way to go if it is to achieve parity with other more developed nations. Therefore, at the moment, the ADB classifies countries like the People's Republic of China and India (amongst others) with the label 'developing Asia'.

The growth of the Chinese middle class (fitting with the trend of a rising Asian middle class) nonetheless demonstrates that rapid economic expansion in China has been of most benefit to middle income and high income earners, with around half of the country's population still consuming less than 4 dollars per day and with millions of people still at risk of suddenly being plunged into hardship.

This perhaps explains why Chinese academics have sought to downplay and refute the ADB's findings. The CCP has long drawn criticism for its economic policies apparently widening the gap between rich and poor rather than narrowing it, prompting questions over the extent to which China can claim to be a 'socialist' state anymore. In addition, the Party's authority is based on the 'approval' of the proletarian and peasant classes- if these parts of society have been superseded in size by an expanding middle class, the CCP's claims to legitimacy lose their foundation. Yet, this said, economic success often brings a degree of social and political stability for regimes, making it seem unlikely that Beijing's approach to development will change in the immediate future. Until the Chinese growth bubble bursts (if this should happen at all), future ADB reports will in all probability be highlighting the same kind of trend.

To read the full Asian Development Bank report, click here.

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