Stats About China’s Classes

Yesterday I read a fascinating piece published by that scion of geopolitical intelligence, Stratfor, entitled: “The Importance of China’s Rising Middle Class.”  Rather than summarizing the piece I wanted to talk about several of the remarkable statistics from their analysis.

• First, guess the size of China’s middle class as a percentage of its total population?  Would you believe that, according to the Chinese Academy of Social Science (CASS), China’s middle class is a scant 8% of their population?  That still represents 104 million people.
  • Interestingly, this number was just revised downward from a middle class of 24% by CASS in a study just one year ago.  Stratfor attributes the change in the number to the nebulous quality of defining what is the “middle class.”  However, definitions can’t possibly range so drastically as to cause a change in the total number of middle class in China by a magnitude of 200%.  Instead, I see this as evidence of the faulty and poor quality of Chinese statistics.  Largely the poor quality stems from government bureaucrats who write their reports to placate their bureaucratic audience.
  • This very low number of middle class folks has got to be creating tension in China.  Because what it means, combined with the statistics below, is that 91.2% of Chinese are actually in the lower class.  Ouch!  Many people have heralded the end of the Middle Class in the United States and the ascension of the Chinese as the next pre-eminent global power.  But let’s be honest, China has a very long way to go in terms of wealth distribution and economic opportunity before it can claim to have usurped the United States.  I have been saying for several years now that the Chinese have got to pass this hurdle before it can truly call itself a world economic power.  Until there is a larger, more powerful middle class in China there remains the very potent possibility of violent revolution in China.

• Second, Stratfor’s piece states that the upper class elite in China are a paltry 0.2% of the population.  Yet, that very small number of person controls 70% of the wealth of the country.  Ouch!
  • In the First World there are incredible concentrations of wealth in those at the top of the economic food chain, too.  However, what is different is that there is generally greater political freedom and the ability to change your economic status through education and hard work.  Yet, in China, there is just one political party, and unless you are associated with it, you have very little opportunity for upward mobility.
  • This has to lead to an increase in frustration, making some sort of violent conflict more likely in the future.  It’s no wonder that there are continual, and increasing, reports of violent protest in the Chinese hinterlands.

• Third, and finally, a full 27% of China’s elite have sought “investment immigration” status.  That means that they have permission from the Communist government to invest all of their wealth outside of China proper.
  • This percentage is outsized compared to almost every other country on the planet.
  • To me this is a powerful vote of “not-much-confidence” in China’s government and its investment opportunities.

As I indicated in my 2011 Predictions, China is a risky place to invest right now.  Furthermore, news from China continually indicates that economic insanity and social divide are increasing.