China's booming middle class is creating world's most dynamic consumer market
economist.com
economist.com
http://www.barrons.com/articles/anne-stevenson-yang-why-xi-j...
"China is sinking into a deflationary recession that’s increasing in speed and may take some time to run its course. Investors have lost faith in the property market, which alone comprises about 20% of GDP, when taking into account the entire supply chain, from iron-ore production to construction to related financial services and appliance sales. Employment and wage compensation will suffer. Consumption will continue to suffer. There’s even an outside possibility that China’s economic miracle could end up in a fiery crash landing, if a surge in banking-system loan defaults outruns government regulators’ attempt to contain such a credit crisis and restore financial confidence."
She has a good video about China's economy here: https://www.youtube.com/watch?v=C2SStFt-k_A
"Over the last seven weeks alone, $190 billion has left the country."
http://www.businessinsider.com/chinas-record-capital-outflow...
"by 2018 all of China's excess reserves — cash that it has on hand to use immediately — could be gone."
You can go to China or some of the surrounding countries (SE Asia, Japan, Australia) and see for yourself. Or look at the sales reports from Apple. The massively growing Chinese middle class is quite a real thing.
Yet the reaction here is of scepticism, disbelief, denial.
I don't understand that.
No other topic (Europe, US, Africa, Middle-east ...) is met with same.
This company just plays the normal MBA playbook in an echo room and every listens without thinking. Just look at the former (some now bankrupt) companies that hired McKinsey. Amongst them Enron and Swissair.
http://www.ritholtz.com/blog/2011/03/is-mckinsey-co-the-root... http://business.time.com/2013/09/10/mass-layoffs-overpaid-ce...
China's Government has been infamous for lying about economic statistics for decades. Their unemployment rate has hardly changed since the 1980s. For a while - 2001 to 2009 - their real growth was so dramatic it didn't matter much that they were lying about everything. Now that the tide is going out on the world's second largest economy, it matters in a big way.
"The Chinese are corrupt and never tell the truth." "The Chinese are only good at at stealing and copying things." "The Chinese cyber-threat ..."
On the other hand, I've noticed in Japan, even with the pervasive anti-China sentiment, news sources are keen to use "Chinese officials" or "China's central government."
That's quite odd, I notice the opposite. I notice many pro China pieces here on hackernews. Whether it's talking about their green energy, growing economy, financial markets or what have you.
Perhaps you've fallen victim to what's known as hostile media effect? (https://en.wikipedia.org/wiki/Hostile_media_effect)
It says that you tend to notice more negative media & chatter about something you care about or have an interest in, regardless of reality.
And I think this might actually be the case here because the original commentor above wasn't "anti-China" at all. He was stating a contrary viewpoint. Being realistic doesn't mean something is automatically "anti". If there was an article about the U.S middle class growing this year, and someone posted a comment which disputed that, it wouldn't be an "Anti-American" comment.
Speaking of, I see more "what's with the anti-China comments?" more than I notice actual anti-China comments. In fact, I almost never see truly anti-China comments.
You have a point that being mistaken is different from being hostile or anti, but we do call people "anti-vaccine" when they are just mistaken and as a result genuinely worried about vaccine. I think one should interpret "anti-China" the same way.
"More than 96% of respondents to the latest Wall Street Journal survey of 64 economists–not all of whom answered every question–said China’s gross-domestic-product estimates don’t accurately reflect the state of the world’s second-biggest economy.
“Official data are manufactured to fit the government’s narrative,” said Stephen Stanley, chief economist at Amherst Pierpont Securities."
Even in the much freer US, there are examples of (subtle) information manipulation. Such as releasing numbers that don't fit the government narrative :
- on a Friday afternoon (when all journalists are driving home or drinking at a bar)
- on page 95 of a 96-page report
Xi Jinping: "We love peace" ,But his CPC's State TV commenter on parade: "Look at this missile, it can hit Hawaii"
U.S. help China fight against NAZI, but China under control of The Communist Party of China will become another NAZI
People have been saying this since Deng Xiaoping took over, over 35 years ago. Actually, they've been saying it for over 65 years.
https://en.wikipedia.org/wiki/Great_Leap_Forward
https://en.wikipedia.org/wiki/Cultural_Revolution
Note the latter created an uneducated generation, and as of late we've been learning a lot more people were slaughtered than was generally thought.
Moving forward past the Gang of Four, it's hard to see how this experiment won't end in tears:
https://en.wikipedia.org/wiki/One-child_policy
Where it's strictly enforced, it results in what's called 4-2-1, where 4 grandparents are supported by 2 parents (as long as they can) are supported by 1 child. That, the lack of a general social safety net, and the general government policy of financial repression (https://en.wikipedia.org/wiki/Financial_repression) appears to be short circuiting a lot of what I presume The Economist article is talking about, for many people are desperately trying to save for their and their elders' old age instead of spending like "normal" consumers. E.g. one reason for the property and other bubbles, which held out the promise of better investment returns.
There is a ton of consumer spending in China. Apple stores everywhere in big cities, way more than London or New York for example. The biggest name luxury brands are all over the place. Cost of living in Shanghai is on par w San Francisco, Beijing is probably higher.
Are any of these signs of middle-class prosperity?
The general theory here is that you want a huge middle class spending a lot of money. In aggregate, in the US at least in times past, the broadly construed middle class had more wealth than the upper class, spend more, and also provide useful functions WRT to upper class earnings and spending. E.g. how cool are the Apple products that I see for sale in my local Wal-Mart? I.e. to what extent does middle class adaptation of upper class fashions drive changes in the latter?
I'd say the diagram in the article looks pretty on the money in terms of rapid growth of middle class. It's not as big as in, say, Germany of course but it's definitely there and looking very healthy. There doesn't appear to be _significantly_ greater poverty in the streets than in NY, LA, or SF. There is clearly disparity as you might expect in a turbulent emerging economy - the levels aren't too obviously dissimilar to much of the US or UK and visibly greater than western Europe and Nordics. Shanghai already makes many major Western cities look like a backwater.
The Cultural Revolution kicked off an era of double digit GDP growth in China, which persists to today.
I think the Cultural Revolution created one of the most politically educated generations in history. The PRC seems to have survived its graduate schools closing for a few years. Didn't the US and Europe see a dropoff in college and grad school during the early 1940s? They managed to survive that.
Personally I think that empowering young people to smash and burn Buddhist sculptures and paintings, and to eradicate the feudal vestiges of China are what helped it onto its current path of prosperity.
Also, the pathology of focusing on bodies instead of GDP per capita can be found in the US in the Social Security debate. Instead of dividing the GDP by the number of people collecting social security, they count bodies working and retired, as if GDP per capita were not rising. This approach only works where there is no GDP growth. GDP per capita in China doubled in the past eight years, and quadrupled in the past thirteen years.
The feudal thinking was that something like 4-2-1 is a problem. The standing committee of the Politburo of the communist party of China knows that the problem was too little economic growth, and too many children for each peasant family. If they thought your way, they really would be worse off.
That's, I suppose, chronologically possible. That is, the growth kicked off after the Cultural Revolution.
Note well the word "after". The Cultural Revolution ran for 10 years (1966-1976), per Wikipedia, and then later, after that, China kicked off an era of double digit GDP growth, which persisted in China until maybe a year ago. That "later, after that" part is part of what makes me really skeptical of your view that it triggered the GDP growth.
It seems much more reasonable to suppose that the trigger was Deng's reforms.
And that's silly. China will grow tremendously over the next 30 years, and that growth will be filled with turmoil, booms and busts. Things are only black and white in comic books.
But does the emperor have clothes on? No one can really say for sure.
Still, and I know this is not the point of the article, they are too many to live well, no matter how rich they become. Life there is a sequence of long lines. Three weeks there have reset my baseline for many things. When I came back home (Milan, Italy) I was surprised by how silent and desert it is and by how much sky I could see. Hardly the feelings one usually has when getting here.
Until Aug,2015 about 276 lawyers who help Chinese people protecting their human right have been arrested. But China still claim it is a country under the rule of law.
Another example is that recently an official media of China claim that China is the most democratic country in the world.
CCP is evil, never trust it!!!!!
Rule of law is necessary for economic prosperity because without rule of law, entrepreneurs cannot confidently engage in economic activity without fearing that their property rights will be trampled and the wealth they generate will be taken away by an arbitrarily deciding government. Why should someone take so much risk and then be punished for their success? Without rule of law, there can be a temporary party for a few decades, but the party stops when the government starts getting out of hand and abuses its power. This is why Xi Jiping is making stamping out corruption one of his top public priorities, more so than any previous Chinese leader in modern history. He is also on record that he wants China to move forward to have proper rule of law.
I dislike it when people bring up Singapore as an example. Singapore is so small that it's really easy to manage compared to a large country with a large population. And besides that, Singapore doesn't have poor quality rule of law compared to other countries (yet).
edit: I get the impression that you equate rule of law with democracy. But you didn't actually say that, so please confirm for me whether or not that's what you really think. Rule of law is something else entirely: https://en.wikipedia.org/wiki/Rule_of_law
And/or this campaign is destroying rivals to his power....
He is also on record that he wants China to move forward to have proper rule of law.
And if so, we'd better hope he's a 2nd Lee Kuan Yew. Except as you note, the scales don't even vaguely match, trying to effect such a policy change without well neigh unimaginable reforms all the way down to the local level strikes me as equally unimaginable.
One of the reasons to equate the rule of law with "democracy" is checking the power of local potentates; hard to see how a huge, all powerful state like the PRC can do that from the top down.
Xi Bolai was an example of a campaign to destroy rivals to his power using the claim of wanting to clean up corruption. He had goals to achieve not yet achieved. Xi's already at the top. It would be very difficult to remove him from power, given the way the Chinese government operates. It would be tantamount to revolution. If revolution happens, I can't see it being because power rivals plot it.
Name the long list of countries with low freedom and high economic prosperity - the list is in fact extraordinarily short.
Singapore isn't a low freedom country, it's a mid freedom country. It has a level of freedom comparable to Mexico or Turkey. Low freedom nations: Saudi Arabia, Pakistan, Myanmar, North Korea, Sudan etc.
Off the top of my head for relatively free + prosperous: Norway, Sweden, Finland, Germany, UK, US, Japan, South Korea, France, Denmark, Netherlands, Canada, Australia, New Zealand, Italy, Switzerland, Austria, Iceland, Belgium.
Now match that list with relatively unfree nations that are prosperous. Outside of a select few petro States, you're almost entirely out of luck. That list of prosperous + free states is so far beyond the low freedom list across the board on quality of life and economic metrics, there is no meaningful comparison to be had.
One could argue that due to the spying and the prosecution of Edward Snowden, that the US gov't is also lost legitimacy.
Basically, the "rising consumer society" mantra has been going on for a number of years, then various revelations show how false that. Then this just repeats the mantra rather than in any way refuting the revelations.
Now it seems the giant in the room that everyone needs to accommodate is the Chinese consumer.
The US economy growing at 2-2.5% is growing nearly as fast as China's economy today (given their non-fake rate of growth is more likely in the low single digits of around 3% to 4%).
In 1999 someone from the Korean company called up and asked if we could certify our software to be Y2K compliant.
In the end the product was dropped because there's a lot of effort that goes into making an application a product you can sell to other companies, and we would have had to grow our organization more than the higher-ups wanted to grow it. Things like fancier interfaces, license enforcement, documentation, packaging, 24 hour support, etc.