The development of a middle class, some hope, will help promote political reform and democracy in China. However, the current middle class as it stands is economically and politically weak, and cannot be expected to effectively play that role.
“Whether the middle class will prosper, or vanish, depends on government policies,” said Professor Tang. One important reason for this predicament is that the government has controlled much of the economy, and has left little room for people to fulfill their dreams and aspirations, he added. “Institutional and financial barriers, and unwritten rules governing social life combine to make fair competition virtually impossible.”
For example, nearly two thirds of China’s economy is controlled by State-owned giants, making it difficult for private small and medium-sized enterprises to prosper, Tang noted.
According to the 2007 Blue Book assessing the competitiveness of Chinese enterprises, the percentage of wages to China’s GDP decreased 12 percentage points from 53.4 in 1990 to 41.4 in 2005. Meanwhile, large State-owned businesses have seen huge increases in profits, and the middle class, the majority of whom are wage earners, has failed to keep up with overall economic growth.
To help reduce the tax burden on the middle class, there have been calls to raise the taxable personal income level. The current minimum taxable income is 2,000 yuan (US300), which is 2.5 times that of 1980. In the same period, however, the monthly wage among average Chinese has increased almost 300 times, making middle-income earners more heavily taxed. While the poor benefit from tax-deductions and a large proportion of the wealthy have no taxable incomes, the middle class is left to bear majority of the income tax burden.
Since 60 to 70 percent of the entire population finds itself on the lower end of the socioeconomic ladder, the government’s priority remains to improve the livelihood of this segment of the population. Most recent policy changes regarding social security, medical reform and education have focused on the poor, rather than the middle class.
A Political Concept
Despite what appears to be a dire situation for the middle class, there is optimism concerning its development in China. Lu Xueyi, a sociologist from the CASS, has pointed to the fact that China’s mid-income population is now increasing by 1 percent every year. If this trend continues, in 20 years these people will account for 40 percent of the general population.
But to many, the middle class is not defined by economic terms alone.
“The middle class is more than just an economic concept, it is also political,” said Xue Yong, professor of history at Suffolk University in Boston.
Professor Xue said that in the US, the middle class is influential because the people that make up this segment – teachers, journalists, and other leaders – establish the leading social trends in America and are united by political activities, such as voting and campaigning.
“By participating in public political life, the middle class has a shared political awareness,” Xue said. “The amount of money one makes may even become irrelevant in many instances in the US.”
But a similar condition does not exist for China’s emerging middle class. Furthermore, a shared identity and value system for those in the middle class does not exist. In this sense, there has never been a middle class in the country, only middle-level income earners.
Indeed, the Chinese government has always used “middle-level income earners”in official language. Many scholars have chosen to avoid referring to this group of people as a “middle class.”
Professor Su Hainan from the Ministry of Human Resources and the Social Security Institute of Labor Wages predicts that China will have a middle class in a typical sense of the term by 2020 at the earliest. “By then, the middle-level income earners will make up about 38 percent of the general population,” he said. “But only when this group establishes a shared value system, will China claim to have a real middle class.”
March 2010