93% of China’s Urban Population Will Reach Middle Class By 2030

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93% of China’s

Urban Population

Will be Middle Class

By 2030

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While American politicians bemoan the loss of America’s middle class … China is creating a Middle Class … and it is ‘Catching Fire’!

Prospects for the Chinese Middle Class Are On Fire Photo Randy Olson

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Business Insider has recently shared a  chart from a research note published by ANZ’s Greater China economists. The article paints an optimistic future for China’s long-term prospects as a rising middle class will boost domestic consumption’s contribution to GDP from 36% in 2014 to 50% by 2030.

NOTE: The International Monetary Fund announced in October of last year that China’s economy, when measured by purchasing power parity (PPP), surpassed that of the United States to become the world’s largest. It’s a significant milestone in China’s evolution into a global economic power.  The U.S. has occupied the top slot since 1872. By the end of 2014, China will make up 16.48% of the world’s purchasing-power adjusted GDP (or $17.632 trillion), and the US will make up just 16.28% (or $17.416 trillion).

[Simply put, PPP is a global index of a person’s economic well-being. In essence, the Chinese consumer can buy more goods and services with a ¥ RMB than a U.S. consumer can with a $ dollar. Therefore it is not about how much you make … but about what you can buy with what you make. For an in-depth, yet easy to understand definition of PPP, click here. ]

china_household_income-2030

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Buying Power …  China has $21 Trillion in HH savings:

Chinese save about 30% of their income vs. a U. S. HH savings rate of around 5%. [ US annual gross domestic product is around $ 18 trillion as compared to China’s consumer HH savings of $21 trillion.] With the combination of savings and rising personal income, China is about to shift from developing capital-intensive infrastructure projects such as industrialization and manufacturing to the development of the consumer market. The government is focusing on pensions, health insurance, education and affordable housing improvements with the aim of freeing consumer’s private resources, salaries and savings, for the purchase of consumer goods and services.

According to a June 2015 Bloomberg article:

“Few events will be as significant for the world in the next 15 years as China opening its capital borders, a shift that economists and regulators across the world are now starting to grapple with.

With China’s leadership aiming to scale back the role of investment in the domestic economy, the nation’s surfeit of savings — deposits currently stand at $21 trillion — will increasingly need to be deployed overseas. That’s also becoming easier, as Premier Li Keqiang relaxes capital-flow regulations.”

China is ramping up the middle class curve:

To some observers it resembles the industrial and consumer revolutions that transformed the United States’ political and economic global order at the turn of the previous century. Although the borders of China and the U.S. in terms of square miles are roughly the same,  China has a population of 1.3 billion people — 4.5 times larger than that of the U.S., or approximately 20% of the world’ population. China’s urban population is over 2 times greater than the U.S. total population. To that extent, it’s safe to say China’s current revolution has the potential to be significantly more disruptive for the world than America’s earlier rendition.

[One of my favorite guides to comprehending the impact of China on the global economy is Understanding China’s Digital Generation by Heidi Schultz, Don Schultz and Martin Block. Whether marketer, politician, financier, operations manager or every day citizen this is a great book to gain understanding of what’s next after what’s next. Also worth a visit is the FREE … ProsperChina InsightCenter™  which is an advanced cloud-based platform for the visualization and delivery of key insights and answers on the financial outlook, lifestyle, and media consumption of Chinese consumers. ProsperChina InsightCenter illustrates with quarterly updates how Chinese consumers feel about the China’s economy, changes they are making in reaction to economic fluctuations, where they are shopping, and how they are using media including smartphones and other new media, Access the Prosper site free click here. ]

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China’s transforms from an agrarian to an urban society:

The transformation began in 1978, when according to Wikipedia, the urban population was around 20%. By 2015, the urban population is now 54% of China’s total population according to the IMF. 6680_1600x1200-wallpaper-cb1277394496

China’s two largest cities, Shanghai and Beijing, each have populations in the 22-23 million range. (New York City has a population of around 8.5 million.) That’s larger than the population of Australia or the entire state of New York. 160 cities in mainland China have populations of more than 1 million compared to 10 in the United States.

Cities like Beijing, Shanghai, Guangzhou, and Shenzhen as well as 30 provincial capitals with populations over 5 million are among the most populous, modern and dynamic cities in the world.

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China’s Consumer Buying Power is Expanding:

  • China has now also become the most important single-country market for Mercedes-Benz and Porsche – it has long been the top market for Volkswagen, Audi and BMW.
  • China is well poised to surpass Apple’s top two markets: the United States and Europe. Apple’s flagsCEO Tim Cook recently said that as much as 21 percent of the company’s total sales were made in China last quarter.
  • E-retailing … Last year, Alibaba’s websites and other Chinese online retailers together sold about $9.3bn worth of goods on Singles Day. By comparison, US retailers took $1.2bn on Black Friday (the Friday following Thanksgiving), and $1.7bn on Cyber Monday last year via the internet, according to Comscore.
  • As evidence of this growing wealth, by 2025 the Chinese consumer is expected to account for 50% of all global luxury brand sales … up from 35% in 2015.
luxury_sales_nationality_2015_2025

Business Insider

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Shifting Cultures

Bella Photo by Randy Olson

Bella Family Photo by Randy Olson

In the U.S. students are now being taught that mastery and achievements are micro aggression while Chinese students are being taught that failure to master a subject or achieve a goal must be apologized for. To understand the emerging Chinese middle class, I recommend that you read the National Geographic article, click here, about Bella and her family. Additionally, Understanding China’s Digital Generation, click here, will provide you insights as to how Chinese use the Internet differently. Chinese are deeply rooted in China’s Confucian heritage as well as its more recent socialist past … yet they are looking Westward too. They are combining all three cultural systems in a rather unique  and thoroughly Chinese fashion.

One more thing …

The-global-middle-class-wave_full_600

Why you should click

on all of the links in this blog.

If the U.S. does not change direction or you do not have a Plan B 

… the chart speaks for itself.

Think Greece

Thanks to Oliver Maugain of Big Data and Analytics in China for surfacing the report from (r) resonance

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