Can China's middle class spend the world out of recession?
- 20 June 2013
- From the section Business
Meet the Zhangs, one of China's new middle-class families who some economists believe are going to spend their way to a revival of the global economy.
Zhang Dongyang runs his own construction company in Zhengzhou, one of China's fastest growing cities.
His wife, Zhang Min, is a hospital administrator, and together they earn about $40,000 (£25,000) a year.
They own their own apartment, mortgage free, drive a Japanese-made Lexus car and will, they say, soon start taking not one, but two holidays a year.
Their six-year-old son, Zhang Zhiye, attends a private school.
"Yes I do feel middle class," Mr Zhang tells me, adding that it's now become acceptable to admit it.
"People who are more capable rise to the top. This is natural. It is the survival of the fittest."
Of course, the Zhangs aren't going to single-handedly rescue the world from economic misery.
But their spending, along with millions of other middle-class Chinese consumers is, in these doom-laden times, arguably one of the few bright spots on which a future global recovery might be based.
Rush to the cities
On a patch of dry earth just outside Zhengzhou, a grandmother, her daughter-in-law and grandson are trying to scratch out a living in the face of one of the biggest changes in human history.
"It's been dramatic," Mrs Liu says, glancing at the distant city skyline. "There used to be houses and fields here, but now they've all gone."
"The city is taking over the countryside," she adds.
Over the past decade, Zhengzhou, the capital of China's central Henan Province, has accumulated another three million residents, swelling its population to nine million.
It's a story that is being repeated in hundreds of cities across China and it's one that's far from complete.
Mao Zedong spent years trying to eradicate the Chinese bourgeoisie, denouncing them, terrorising them and exiling them to the rural hinterland to learn from farmers like Mrs Liu.
But today, with the same Communist Party still in power, the theory has been turned on its head, and now it's the peasants who are being pushed into the cities.
"We didn't have much land anyway," Mrs Liu says, "but what we have is now being taken to build roads."
With the construction teams working just a few yards away, her next peanut harvest may be her last.
In January last year, China's National Bureau of Statistics announced that, for the first time, China's urban population had surpassed its rural population.
It's a shift that has been happening at an incredible pace, with 200 million people leaving the countryside in the past decade alone.
The exact scale and scope of the next phase is still being debated, but no-one doubts China's new government intends to step up the mass migration yet another notch.
There is little choice, the policymakers believe, because the old model of economic growth based on exports and big government-spending has become unsustainable.
So China is trying to shift to a model of growth based instead on the money in its own consumers' pockets.
And that's where the new middle class comes in.
Consumer spending currently makes up as little as 35% of China's total economy, a long way short of the 70% in other more developed economies.
Pushing hundreds of millions more farmers into cities, it is hoped, will rebalance the economy through a virtuous cycle of development.
The new urban residents will increase their earning power and so spend more on goods and services.
They will also educate their children to a higher standard, producing a new generation - not so much model citizens, but model consumers.
If it's successful, then by some estimates, more than half a billion Chinese people could find themselves counted as middle class within the decade.
The potential for the global economy is obvious, as any small selection from the myriad mind-boggling statistics clearly shows.
China is already the world's second biggest importer and its hunger for resources is keeping commodity-producing countries, such as Australia, in business.
The United States may well still have concerns about the trade deficit, but US exports to China have grown from $27bn in 2003 to $108bn last year.
General Motors now sells more cars and trucks in China than it does back home.
Starbucks is opening stores at a rate of more than one a day and, according to China Daily, the British brand Burberry now operates 70 stores in 35 Chinese cities.
The list goes on and on, testament to the hordes of high-end and middle-market brands now falling over themselves to get a slice of China's growing consumer spending.
For critics, China's rush to build a middle class presents a terrifying vision of mass consumption fraught with environmental and social dangers.
There are certainly challenges ahead.
China's economy could falter, or even collapse under a burden of debt, before the fledgling consumer society takes off.
And policymakers know if they really want to unleash spending, they will need to reform China's system of residential permits that prevents many workers from building a permanent life for themselves in the cities.
But regardless, urbanisation is likely to continue apace, and for people such as the Zhangs, being middle class is nothing but a good thing.
"My parents didn't even have enough to eat, and weren't that keen on children's education," Mrs Zhang tells me.
"We can afford almost anything we want."