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2016/8/19

The Number of China's Middle Class Has Been More Than 200 Million

The Number of China's Middle Class Has Been More Than 200 Million

 

Abstract: Measured and calculated according to the data of CHFS in 2015, the number of China's middle class is, in fact, 204 million, which is far more than the number, 109 million, shown in the Wealth Report released by Credit Suisse. Besides, the aggregate wealth controlled by the middle class of China is actually USD 28.3 trillion, exceeding that of the United States and Japan and ranking the first in the world. However, the level of affluence of China's middle class is far lower than that of the middle class of the developed countries and the proportion of population of the middle class of China is far less than that of the developed countries, featured by a pyramid-type wealth distribution structure.  For China, there is still a long way to go to become a real middle-class country.

 

According to the "Global Wealth Report 2015" (hereinafter referred to as the "Wealth Report of Credit Suisse") released by Credit Suisse on October 13, 2015, the total household wealth of China amounts to USD 22.8 trillion which exceeds that of Japan and makes China the second richest country in the world, next only to the United States; meanwhile, China has the largest middle-class population in the world which reaches to 109 million, exceeding the middle-class population of the United States which is 92 million. The report has quickly drawn close attention of domestic mass media since it is released.

Two hot topics causing the public concern under the discussion on the Wealth Report of Credit Suisse include the reliability of the data of Credit Suisse and the number of the middle class, that is, what the number of China's middle class actually is. For instance, Ma Yun thinks that China's middle-class population has reached to 300 million.

Is the data of Credit Suisse reliable?

The reliability of data determines the credibility of research conclusions. According to the "Global Wealth Databook 2015" of Credit Suisse (hereinafter referred to as the "Databook"), the data of China's wealth is derived from China Academy of Social Science Survey which is carried out by the Chinese Academy of Social Sciences and the data shows the basic situation of China's household wealth in 2000. Besides, except that the data in 2000 is based on the survey, the data in the following 14 years since then is speculated through a model, while the speculation model has yet to be released, so the data of China's wealth can only be called as "speculative data". The fact that cannot be ignored is that both the macro-economic situation and the household assets structure of China have changed considerably during the 15 years from 2000 to 2015, so the speculative data based on the data in 2000 is not convincing. s

Different from the "speculative data" of China, the wealth data of the United States and Japan is directly measured and calculated according to official data and household survey data and it can be defined as "basic data". The data of Japan comes from National Household Income and Consumption Survey (2009) of Japan and the data of the U.S. comes from Survey of Consumer Finances (2013) of the U.S. It is clear that the credibility of the "basic data" is far higher than that of the "speculative data".

In fact, there is no lack of micro household survey data in China. Since 2011, the Survey and Research Center for China Household Finance of Southwestern University of Finance and Economics has carried out three rounds of China Household Finance Survey (CHFS for short) successively and multiple rounds of quarterly telephone follow-up through scientific sampling and modernized survey methods, and it has successfully established a nationally representative household finance database. At the end of September 2015, the Center completed the third-round household survey and collected more than 40,000 samples in total, providing rich and reliable information for the analysis of China's household wealth.

Then what on earth is the population of China's middle class?

The number of China's middle class is underestimated

In the Wealth Report of Credit Suisse, middle-class adults are defined as those who possess net wealth of USD 50 thousand to USD 500 thousand. Such a wealth standard of the middle class is not so high. In this case, unlike the netizens who exclaimed that their wealth levels were under the average standard in the past, many netizens, instead, say that they can also be regarded as middle-class persons according to the standard that the one whose wealth reaches USD 50 thousand can be defined as a middle-class person.  As a matter of fact, this standard is not the only one used to define the middle class. For example, Forbes has also published a judging standard of the middle class that those who are 25-45 years old, living in the city, with a college degree and are professionals or entrepreneurs, with the annual income between USD 10 thousand and USD 60 thousand.

Here, we measure and calculate the number of China's middle class according to the standard mentioned in the Wealth Report of Credit Suisse. According to the standard of net wealth of USD 50 thousand to USD 500 thousand, the latest survey data of CHFS in 2015 shows that the proportion of China's middle-class adults in the China's adult population is 20.1%, which is far greater than the estimated value of Credit Suisse, 10.7%; the average wealth of the middle-class adults is about USD 139 thousand, which is also far more than the estimated value of Credit Suisse, USD 68 thousand. Reckoned based on the data of CHFS, the number of China's middle-class adults should be 204 million instead of 109 million and total wealth controlled by the middle class should be USD 28.3 trillion instead of USD 7 trillion, far more than that of the United States (USD 16.8 trillion) and that of Japan (USD 9.7 trillion). Consequently, both the scale of the middle-class population and the total wealth of the middle class of China have ranked the first in the world, while Credit Suisse has underestimated the two data.

In addition to the obvious advantage of China's middle class on the overall scale, there are another two features that need to be noted. First, wealth per capita of the middle class of China is USD 139 thousand, which is far less than that of the United States (USD 184 thousand) and Japan (USD 157 thousand). Although the absolute number of China's middle class has been far more than the estimated number in the Wealth Report of Credit Suisse, the proportion of the middle class population of China is far less than that of the United States (37.7%) and Japan (59.5%). Second, proportions of people from different classes of China are also quite different from those of the United States and Japan. As shown in the figure, among China's adult population, the proportion of the population above the standard of the middle class is only 1.0%, indicating that very few people are among the high-wealth class. Such proportions of population are 12.3% for the United States and 9.1% for Japan. At the bottom of the wealth pyramid, in China, there are still 78.9% adults whose wealth does not meet the minimum standard of the middle class. According to the estimate of Credit Suisse, such proportions are 50.0% and 31.4% in the United States and Japan respectively. If an ideal wealth distribution structure is an olive-shaped one, then the structure of Japan is relatively closer to it, while that of China is of pyramid type with inequality in the distribution of wealth.

















































































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