In early August, the Chinese Academy of Social Sciences (CASS) issued the 2011 Blue Book of Cities in China. Some of the statistics in the book, particularly figures on the size of China's middle class, have sparked a broad debate on what it means to be in the middle of China's income structure. To add some perspective to the debate, Beijing Review's Tang Yuankai spoke to Song Yingchang, deputy chief of the book's editorial team and Assistant Director of the Institute for Urban and Environmental Studies of the CASS.
Beijing Review: The report says in 2009 there were 230 million middle class residents in China's cities. This is 37 percent of the total urban population. What does this mean and what trends do these numbers reveal?
Song Yingchang: It means China's middle class has reached a considerable size, as a result of rapid economic development since the reform and opening-up policy was adopted in the late 1970s.
Two key trends can be seen in the figures.
First, it is clear the country's middle class will continue to expand. According to the report, in 2000, the middle class stood at 120 million, or 26 percent of the urban population. In 2009, it almost doubled to 230 million or 37 percent of the urban population.
It is true the government has paid much more attention to livelihood development particularly in urban areas. Employment and income figures have improved steadily. In 2010, the number of urban employees reached 320 million, 3.4 times the 1978 figure. The average disposable income of the urban population is now 19,109 yuan ($2,995), 47.2 times the figure recorded in 1972. The medical insurance system and housing security system have been improved significantly. Between 1998 and 2009, the average floor space of an urban apartment increased from 18.7 square meters to 30 square meters. These are all indications of broader progress.
Therefore as long as China's economy keeps growing at the current pace, the size of the middle class will certainly expand.
The second trend is an olive-shaped income structure is taking shape in China. The olive shape refers to a society where the bulk of people are middle class, with tapering ends representing the very wealthy and the poor.
Our studies predict by 2023, middle class inhabitants will make up 50 percent of the urban population, so China is moving into a new era of social stability and prosperity.
There is no official definition of middle class in China, what is the basis for the blue book's categorization?
While there still has no official definition for China's middle class, what is clear is, thanks to rapid economic development, a new social group has gradually formed. This group differs from the strata that already existed 30 years ago. Its members are well-educated, receive high and stable incomes and enjoy relatively high living standards. It is hard to define such a diverse group. Middle class is a blanket term with a range of socioeconomic meanings. In the blue book, we adopt the Engel's Coefficient, a measure of the percentage of food consumption to total household spending, to define middle class. Members of households with their Engel's Coefficient standing between 0.3 to 0.373 are considered as middle class.
Are you able to elaborate and define the middle class in terms of economic capacity, social status, educational level and a sense of their place in society?
The middle class, in general, enjoys a higher income, which means they can afford various entertainment activities, travel and vacationing in addition to daily necessities like food. They tend to own their own homes, possess a good education and exert a strong influence on society. In China, this group mainly comprises civil servants, teachers of higher-learning institutions, high- and middle-ranking executives in hi-tech companies, foreign-funded enterprises and financial institutions, and private entrepreneurs.
As they face greater uncertainty and inflation, can you say the position of China's newly emerged middle class citizens is stable?
The proportion of middle-class people in the country remains low when compared to more prosperous nations, and the middle class has been affected by macroeconomic volatility, taxation restructuring, rising housing prices and inflation. In the long term, however, the middle class will expand as long as China's economy continues to grow.
Do you think China's middle class is already worthy of the name in accordance with internally accepted standards? If the answer is yes, what influence will that class have on China's politics, its economy and its culture?
We can definitely say China has produced a middle class. However in some respects, China's middle class is not as mature or as established as the middle class in other countries. One key difference is, despite enjoying relatively high income and consumption levels, middle class Chinese tend to have only a limited understanding of their social responsibilities.
Despite this, this group plays and will continue to play an important role in many aspects. They are keen to promote democratic politics. They contribute to economic development and technological innovation. They are the main consumers in society and act as social stabilizer.
You just mentioned that the middle class are China's main consumers and act as social stabilizer, but with rising housing prices and surging inflation, they are under a great deal of financial strain. What measures do you think should be taken to deal with this?
Macroeconomic volatility, rocketing housing prices, inflation, an underdeveloped social security system and high-pressure work are major challenges for the middle class. The government bears a responsibility to solve these problems and protect the interests of a group that is vital to China's social stability. First of all, the government should make an effort to rationalize the distribution of national income. The current trend where we see the growth rate of government revenues exceeding the GDP growth rate needs to be reversed. Further the growth in the disposable income of the urban population should keep pace with the GDP growth.
Your blue book also reveals the urban poor in China number more than 50 million. How did you define the poor for this report and what do you think should be done to deal with this challenge?
Urban poverty can be divided into absolute and relative poverty. Absolute poverty means even a minimum basic living standard can't be guaranteed, while relative poverty means the living standard is still lower than the socially accepted level. In the context of the report, the urban poor refers to those with low incomes and inadequate access to daily necessities and public services. These people generally are unable to independently emerge from poverty.
Urban poverty is a social problem associated with urbanization, industrial restructuring, rural-urban migration and the growing gap between the rich and the poor. There are many targeted measures that can be employed to deal with this problem. The first is to implement active employment policies. The government can reserve some public service jobs for the urban poor. It can also use tax breaks to encourage enterprises to take on staff from poor backgrounds. Free vocational training and preferential policies that will allow members of the poor underclass to start up their own business is another strategy to deal with the problem.
Incorporating migrant workers into the social fabric of cities is seen as being of vital importance to China's modernization. In reality, however, migrant workers are still an underclass in urban China. What do you think is the reason for this?
I think the urban-rural dichotomy is the reason for the slow assimilation of migrant workers. This structure has to be broken down to hasten the absorption of migrant workers. A unified household registration system must be set up to eliminate the unfair treatment of migrant workers. Rural areas should ultimately enjoy the same employment, housing, social security and land use policies as cities.