McKinsey Quarterly has an article: The value of China’s emerging middle class It requires free registration, which is worthwhile as McKinsey has a lot of insightful research. The article shows that there is expected to be two waves of middle class arriving in China.
First there is a lower middle class (25,000RMB-40000RMB per year in household income. This is USD3120-USD5000 per year in household income at current exchange rates. It is 10,000-17000 in purchasing power parity terms) In 2005, they were 12.6% of all households. By 2011, they are expected to be 40% of households and 50% by 2015. Households are projected to get smaller from 191 million households in 2005 to 280 million in 2015. Other places project that the Chinese Yuan (RMB) is undervalued and is expected to strengthen.
A closer clustering of points for these projections:
2005 24 million households (12.6%) out of 191 million
2007 41 million households (20%) out of 205 million
2009 73 million households (32%) out of 220 million
2011 96 million households (40%) out of 240 million
2015 140 million households (50%) out of 280 million
The upper middle class (40000RMB-100000RMB per year in household income. This is USD5000-12500 per year at current exchange rates. It is USD17000-40000 per year in purchase power parity terms).
2005 18 million households (9.4%) out of 191 million
2007 21 million households (10%) out of 205 million
2009 24 million households (11%) out of 220 million
2011 29 million households (12%) out of 240 million
2013 39 million households(15%) out of 260 million
2015 59 million households (21.2%) out of 280 million
2025 224 million households (60%) out of 373 million
Those who are richer 100,000+RMB/ year in household income are 0.6% in 2005 or about 1 million households. In 2015, they will be 6% or about 28 million households. In 2025, they are projected to be about 11% or about 40 million households.
Assumptions in these forecasts:
Urban Chinese consumers, rise from 42 percent of the total population today to more than 60 percent by 2025.
Average growth of 6.5 percent in per capita GDP from 2005 to 2025 (a mid-range forecast), with higher annual growth initially but slowing after 2015.
There are no major exogenous shocks to the economy.
Certain events—for example, a dramatic shift in exchange rates, an avian flu epidemic, or the disruption of the government’s market-friendly policies—could make our GDP assumptions overly optimistic.
Other factors (such as increased labor productivity, a more efficient capital allocation, or land reform) could make them too conservative.
Based on the variability in the assumptions, I focused on the nearer term.
By 2011, 70 million to 110 million fairly welloff new consumer households (total gains from low middle, high middle and high end)
By 2015, 150million to 200 million fairly welloff new consumer households (total gains from low middle, high middle + and high end)
This would be a powerful global economic engine to go along with the US consumer. The global economy will be less vulnerable to shocks from reduced US consumer spending if those shocks do not happen as the same time as problems for the Chinese economy.
Brian Wang is a Futurist Thought Leader and a popular Science blogger with 1 million readers per month. His blog Nextbigfuture.com is ranked #1 Science News Blog. It covers many disruptive technology and trends including Space, Robotics, Artificial Intelligence, Medicine, Anti-aging Biotechnology, and Nanotechnology.
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