China making efforts to cultivate middle income class

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Last updated at: (Beijing Time) Friday, March 26, 2004

China making efforts to cultivate middle income class

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The concept of 'middle income class' is relatively unfamiliar to Chinese people who have been living under an urban-rural dual system for long. However, with more than 20 years of reform and opening-up this class has now emerged, grown and even begun to shape a change of China's social structure.

According to the calculation of the Chinese Academy of Social Sciences (CASS), the middle income class in China accounted for 15 percent in 1999 and then it rose by 1 percent annually until it reached 19 percent in 2003. Factors like legal protection and policy motivation are furthering its growth. It is expected that the middle income community would amount to 40 percent of the whole society by 2020. This will transform the society from the "onion" styled structure to an "olive" structure by then.

A real modernized and stable nation is without exception one in which the middle-income class is the majority and those, either at the high and the low end of the income, are in the minority. Like an olive, this social structure is featured with its swelling middle body and tiny ends.

However, opinions differ in the academic circles on the definition and benchmark as regards the "middle income class" in China.

Research department of BNP PARIBAS PEREGRINE defines China's "middle income class" like this: well-educated professionals and white-collars with a yearly earning of 25,000 to 30,000 yuan per capita, i.e. 75,000 to 100,000 yuan a year per household, partake in the corporate decision making and management and engage in mental work. The population up to the above mentioned standard makes up about 13.5 percent of the whole population in China.

Estimation of CASS shows that in China, 48.5 percent of urban residents hold 150,000 yuan to 300, 000 yuan per household. In view of the fact that the majority of the rural population makes poor income except a fraction of farmers with relatively higher income, it can be deduced that about 19 percent of the Chinese population are in the category of "middle income class".

Song Linfei, an expert in social structure, argued that under the present situation in China, groups with Engel index below 40 percent and the minimum taxable line for individual income exceeding 1,200 yuan, or the well-off community, should be regarded as middle income class.

"No matter how you define it, it is the truth that there is still a long way to go before China's social structure becomes "olive" like (at least 40 to 50 percent of the population is middle income class). It remains so far the "onion" like at the most," said Song.

Lu Xueyi, a famous sociologist said: " To keep a steady, harmonious, sustainable and healthy development of the society and economy, it is essential to create a larger mid-income population. That is to help more low income citizens, the majority of the population, to upgrade gradually into the middle income class by raising the level of their income."

"Socially or economically speaking, the middle income class is the most stable one in a society. They generally enjoy a well-off life, having stable jobs, hold positive attitude toward the society and policies, and are loyal consumers. They are one of the market boosters." Lu explained.

"The key problem is due to China's urban-rural dual structure, a large number of urban residents have joined the middle income class while the majority of the 900 million peasants have not." Song urged, " 'Addition' instead of 'deduction' in calculation should be adopted when we are cultivating the middle income class. The so-called 'addition' means to help the low-income group earn more rather than to have the high-income group to earn less. For example, farmers can be transformed into urban residents so that they make more money. Meanwhile, re-employment and re-training campaign should be launched to prevent middle income class from degrading into low income group."

Song stressed the significance of the farmhands working in cities to the income increase of the whole rural population. If the 90 million peasant workers remit 2000 yuan per capita to their families, it would be a considerably large number.

Observers think that the Chinese leaders' speeches on policies and various new economic measures adopted have at least signaled the three important points. That is to face directly the reality of the widening income gap in China and adhere further to the reform orientation in distribution based on essential elements; confirm the legitimacy of money making based on diversified forms of elements distribution; and encourage people to walk up into the middle income class club through legal means.

Since the reform and opening-up started, policies adopted by the Chinese government have favored the fostering of the middle income class. With the reform to deepen gradually, the stock and securities markets have been opened and promoted and large-scale campaign to transform enterprises into join-stock corporations has been launched. The private sector has been encouraged to grow and hi-tech private companies have been started-up. High salaries have been offered to the returned overseas students and salaries have been raised for civil servants and teachers. All of these have promoted the growth of the middle class in China.

By People's Daily Online

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