Chinese middle class is facing the most uphill task in years – to keep itself motivated for better times. The middle class in China, which once was the core of China’s prosperity, is fast losing confidence and awaits major reforms in the country.
As per a report from a job-recruitment platform in China the average monthly salaries in 38 prominent Chinese cities have slipped to 1.3 per cent in the last quarter of 2023 – this being the biggest quarterly drop since 2016. Analysts call for major stimulus boost for Chinese private sector that can uplift sagging confidence of the middle-class countrymen.
For now, pay cuts and lay-offs have become a norm in a regular office environment in China. Companies are forced to reduce headcount thanks to the depressed stock market and sinking property sector of China. While everything looks gloomy indications are clear that there are even more strenuous days to come for the middle class in China in 2024.
As per a recent poll conducted on Chinese middle class, about 40 percent have suffered a wealth reduction of at least 10 percent in 2023. This has led to erosion of trust amid the countrymen over previous policies enacted by the government, further derailing the Chinese economy. As middle-class families struggle to manage their finances they are forced to pull out their children from schools. The top Chinese international schools are facing shortage of students because middle-class parents who earlier would have enrolled are now finding the education costly.
Owning a home which once was considered a status symbol for the middle class and at the same time was a sign of financial stability has lost its charm because the property value is falling unprecedently. Luxury vehicles in China have lost their value as fuel prices are steeping high and stacks of cars lie unsold in the showrooms. Mega marketplaces cannot clear their luxury items’ stocks as the middle class, which once was thriving, has now reduced its spending due to financial instability. All these are signs of depressed middle class of China – estimated to over 400 million people – that has begun to dwindle with major trust issues over government policies.
China’s property market is at its weakest and the country’s benchmark CSI 300 stock index has lost around a third of its value resulting in a vulnerable economy. This has made the middle-class consumer weaker, dented the private-sector investment, and sky-high youth unemployment. Chinese are spending less, saving more, and evading risky investments.As per the data from the central bank of China, thehousehold savings in the country has peaked to $19.83 trillion in February this year, which is reflective of weak consumer confidence in decades.
Every year many individuals falls out of middle-class category owing to poor financial conditions resulting in shrinkage of middle class in China. A daily media report in China had indicated even when the two-thirds of China’s middle class falls in the lower-middle income category, majority of them are near the threshold as many individuals slipping out of the middle-class category, which negatively impacts the country’s economy.
The unemployment rate of China has stayed low at 5.1 percent in December 2023,reflective of widespread underemployment in the middle class. In 2021, over 200 million people – nearly a third of China’s work force – were enjoying a stable and well-paying jobs. But cut to 2023, many white-collar workers lost their jobs or accepted pay cuts or no had pay hike. In the last quarter of 2023, in comparison to 2022, average salaries dropped to 1.3 percent in major cities of China.
Beijing has a lot of thinking to do in order to ease the middle-class families’ woes in the long term. Major policy shifts, prioritizing citizens welfare, supporting rural and migrant workers, and easing public housing are some noticeable changes that the middle class expects from the government bodies. Furthermore, to better manage the public- and private-sector employees, the central government needs to ensure timely disbursement of wages to boost consumption and spending in the country.
Finally, if China wants to uplift its middle class it has to improve the employment rate of the country. Beijing currently is not creating enough job opportunities for the middle class, which could be done by initiating training programs for new graduates, enforcing skill enhancement for the old workers, and motivating entrepreneurship among the jobless. The rejuvenation of China’s economy hinges on a fortified middle class, which is its backbone. It is the key to China’s resurgence that will happen when its middle class is presented with equal opportunities with a sense of common prosperity.