A couple of us attended a fascinating and eye-opening talk last night given by Arthur Kroeber of China Economic Quarterly and Paul French of Access Asia.
The seminar, titled "China’s Emerging Middle Class: Miracle or Myth?", set about deconstructing the numbers published by the Chinese government, as well as the exuberant projections of investment banks, on the size of the "middle class" and the value of the national retail market.
Mr Kroeber made an excellent point when he said that he prefers not to use the term "middle class" when speaking of China, because, as he puts it, "There is no Chinese middle class. It doesn’t exist." What he means is that the traditional Western idea of a middle-class family, one that might "take the SUV to the mall on Saturday and have dinner at TGI Friday’s," is a completely unknown entity here. That very family dinner, he points out, would cost the same as the average Chinese family spends on food in an entire month (~US$100).
Instead, Mr Kroeber prefers to divide the citizenry into two categories: "surviving China" and "consuming China". Out of 1.3 billion people, he contends, about 1.2 billion constitute Surviving China – those who make enough to get by and save for the future, but who, as far as foreign (and to a certain extent, domestic) retailers are concerned, basically don’t count, because they simply don’t have the disposable income to spend at Wal-Mart. The other hundred million or so are well-off enough to spend a bit of discretionary income on fashion items, movie tickets, etc. These are the ones businesses should be focused on selling to.
Overall, both men portrayed the way that the Chinese market is consistently overestimated. Mr French is the author, most recently, of a book on Carl Crow, the original "China hand", whose own book, 400 Million Customers, exploded the myth of easy fortunes to be made in China back in 1937. Although Mr French did not bring up Carl Crow, those in the audience who know him were certainly making the connection.
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