Monday, May 2, 2011

The Ambivalent Role of China's Middle Class -- A Book Review

The Chinese Dream: The Rise of the World’s Largest Middle Class and What It Means to You by Helen H. Wang, Bestseller Press, $16.97 paperback, $9.99 Kindle edition

"What do you think 'middle class' means in China?"  I raised this question to Chinese friends during my trip to Chongqing in April.  I was after a spontaneous answer.  From what I heard, the consensus seems that if you own a house and a car, you are in middle class.  An art professor, who owns neither, said that by classical definition a professional is middle class, but in today's China he is no longer sure if he is middle class despite the fact he is a professional.

And this is what I found in the Merriam-Webster dictionary: 
Definition of MIDDLE CLASS: a class occupying a position between the upper class and the lower class; especially : a fluid heterogeneous socioeconomic grouping composed principally of business and professional people, bureaucrats, and some farmers and skilled workers sharing common social characteristics and values.
In her new book, The Chinese Dream: The Rise of the World’s Largest Middle Class and What It Means to You, Helen Wang defines Chinese middle class today as "urban professionals and entrepreneurs from all walks of life, who have college degrees and earn an annual income from $10,000 to $60,000."  In Chinese currency and today's exchange rate, those income figures convert roughly to a range of 5,500 – 33,000 Yuan per month. This is a wide spectrum: those in the lower range likely won't be able to afford a house, and thus might not consider themselves middle class.

Regardless of the definition, Wang chose a great topic. It is unarguable that a large middle class is growing quickly in China right now. The old impression that China is a country made up of many laborers working for nothing along with a few corrupt party bosses is fading in America. Nonetheless, many of the fears associated with that impression, especially the concern that China is taking all America’s jobs and power, remain with us today.

In The Chinese Dream, the author tries to do two things. First she tries to give a face and voice to those Chinese people who are neither slave laborers nor corrupt politicians. Second, she tries to show why changes in the makeup of China’s population, specifically the emergence of a powerful middle class, should alleviate fears the West have about China and its rise on the international stage. She is quite successful in the first of these.

Wang interviewed and writes about many people. Some are movers and shakers with rags to riches stories, such as those profiled by James Fallows and Phillip Pan, but many are far more ordinary folk who have done better than most, but the same as many. These ordinary people form the main body of the middle class, regardless of the way it is defined. Their youth, optimism and, dare I say it, irresponsibility, are quite fascinating to read about. The emergence of conspicuous consumption, people running after the latest status symbol, is good to have chronicled even if I find it somewhat disheartening.

My favorite chapter in the book, and probably the most informative chapter for those trying to understand what this middle class means for business, is the chapter on Jack Ma and his Alibaba company. The man himself is a remarkable character, and his success against ebay is fascinating. One of the most interesting thing is that ebay’s errors do not seem to be from a lack of cultural understanding so much as an inability to comprehend the mechanics of a cash economy.

The genesis of China's new middle class as a whole, however, is hardly a glorious story. I read with keen interest the book's well-written first chapter, "A Peculiar Private Sector," which describes the "state-created bourgeoisie."  When I left China in the summer of 1988, the private sector was still budding.  If there was a middle class at the time, it could only be cadres at various levels of the government and state-owned enterprises and organizations, not necessarily because of high salaries but their access to resources. (In fact, my parents belonged to this class.)  Then, in the early to mid-2000, each time when I returned to Chongqing for a visit, I repeatedly heard taxi drivers – most of them had been laid-off factory workers – complaining bitterly that their factory managers divided the state property and pocketed the money, while firing the workers. Now in Wang's The Chinese Dream, the story of Chen Ling, whose position as a division director at a state-owned company conveniently morphed into ownership of a private business, provides the missing details of that transition. As the author aptly summarizes, "There was no open bidding, no auction, and no initial capital requirement. The process transferred wealth from the state to individuals. Some of them were connected and capable, others were simply in the right place at the right time."

A middle class that was created by the state in this manner and continues to benefit from the current system ought to have some fundamentally different traits from their (nominal) counterpart in Western countries. I was hoping the author could explore this aspect further and, while she does touch on some of the differences, she seems to emphasize the commonalities more. 

For one thing, the Chinese middle class is more content than critical, thus it easily becomes the keen keeper of the status quo (and this was exactly the impression I got from talking to various businessmen during my visits to Chongqing in recent years).  As such the author's assertion that “As the Chinese middle class continues to grow, democracy will arise in its time” seems a bit questionable. This said, I do agree with her that China's democratic system (if there will be one) could take a very different form from the West's. For example, a Confucian named Jiang Qing (蒋庆) has suggested that a variety of different paths of governance could emerge.

Another issue I wish Wang had addressed is the tendency of China's middle class to emigrate. As a Chinese blogger recently wrote, to those who made some money in China, there is the feeling of insecurity about their assets. Apparently they are more likely to consider going abroad than striving toward a democratic government. The well-known magazine publisher and acrimonious essayist, Hong Huang, says that all the Chinese whose annual income has reached 120 K Yuan (which happens to fall in The Chinese Dream's definition of middle class) have the tendency to emigrate. If this is even partially true, it is something to worry about for both China and America.

In the end, Wang has not quite achieved her goal of alleviating fears and suggesting America will be stronger with a strong China than without. I partially agree with that conclusion, but my agreement derives from the simple observation that people are weak in poverty, content in prosperity and dangerous in between.  Wang seems to suggest monotheism as a unifying force in international conflicts, but I have not seen a lot of evidence lately that monotheism assures peace, or even moves us in that direction.

I admire the author's noble hopes, and I would agree that China shows no tendency toward imperialism (to use the word we so loved to throw at America as children), but perhaps because I'm a pessimist, I do not see it as inevitable at all that China and the US will get along in the future, or that there will be a convergence of governance conventions. Many things could happen; I envy Wang her optimism.
Despite my slight disagreement with some of the conclusions, the material from which they are drawn is well worth reading. Wang cites not only many conversations, but a variety of academic and business studies that are helpful in framing the overall issues facing China. And she has certainly started a very interesting discussion on what China's middle class means to Americans.

4 comments:

Anonymous said...

If by middle class the author is referring to those Chinese who earn between US$10,000 and US$60,000 per year, then she is speaking only of people who belong to the top 12 or 15 percent of China's population. A recent report suggests that approximately 150 million Chinese earn US$10,000 or more per year, with very few earning as much as the average American (i.e., ~$40,000). In other words, 85 percent of Chinese earn less than US$10,000 per year, with approximately 36 percent living on US$2 or less per day (according to 2009 IMF figures) - that is, twice as many Chinese exist on US$2 or less per day than earn US$10,000 or more per year. Extend the figure to incluce those Chinese who live on US$5 per day (RMB 35) and you almost certainly approach one billion people. People typically trumpet the fact that 400 million Chinese have been "lifted out of poverty" during the last 30 years. Even if you assume this figure to be close to the truth, that leaves out 900 million people. What's more, the majority of the 400 million who've been "lifted out of poverty" would still seem quite poor in the view of the average American.

Interestingly, the average annual salary in Beijing and Shanghai (China's top 2 cities, in terms of annual salary) hovers just around US$10,000 per year. That is, your average Beijinger and Shanghainese belongs in the top 15 percent of all Chinese in terms of annual salary.

I'm less interested in understanding how the top 15 percent of Chinese live than I am in how the bottom 85 percent live. I've lived in Beijing for the better part of 10 years, and I'm surrounded by well-educated people who own homes and cars, graduated from China's best universities, and vacation/shop in Hawaii and Tokyo. Under these circumstances, it's easy to forget how unlike most of their countrymen these people are.

Less talk of China's "middle class" and more talk about the "Latin Americanization" of Chinese society.

Xujun Eberlein said...

Great comments - thanks! I agree with you that the majority of Chinese are still poor, the middle class can easily forget about them, and we should certainly pay more attention to the poorer majority when discussing policies. On the other hand, the middle class elites are supposed to be more influential to the policy maker, so it is also important to study them, don't you think?

I believe that Helen Wang, and many others, are focused on the middle class because they believe that, in time, the middle class will be the majority like in America. When, or even if, that will come true is a very interesting question that I have not seen addressed.

Helen Wang said...

Xujun,

Various predictions indicate China's middle class will reach 800 million in fifteen years or so. That's significant enough number. The reason I chose to look at China from the vintage point of the middle class is because it is the one thing that connects with Americans, and the one thing that will have enormous impact on global economy, environment and politics.

Check out another review about The Chinese Dream: http://internetreviewofbooks.blogspot.com/2011/05/chinese-dream.html?spref=fb.

Xujun Eberlein said...

Thanks for the response, Helen. That's helpful.