Karl Marx and Friedrich Engels wrote, “The [written] history of all hitherto existing society is the history of class struggle.” (Communist Manifesto, 1848)
Thirty years of change have brought more than Lamborghinis to China and laptops to the West. Today, Europe is more socialist than China, and China is more capitalist than the United State.
The days when grey-clad men and women bicycled in choreographed unity through Beijing’s streets has been replaced by 4 million cars engaged in a high-stakes game of chicken chaos.
One aspect of this metamorphosis, one which businesses should be watching, is the emergence of a new complicated urban class system. One of the phenomenons is the number of billionaires, which seems to be going up exponentially, while the numbers of rural poor is only decreasing incrementally. As you look at China today, it seems to be following a familiar pattern to us, but one which is at odds with the ideals of its founding.
Urban poor
China’s urban poor individually earn less than 1,000 RMB ($150) monthly with a total household income of less than 36,000 RMB ($5,400) a year. They sell trinkets and DVDs, distribute flyers and work at whatever job is available. They live in cramped, close quarters, with rent taking up one-third to one-half of their income. Some sleep on the streets, under bridges or in tunnels if nothing else is in their price range. Walking or a bicycle is their mode of transportation. They rarely take a bus. Their diet consists mostly of vegetables, cheap starchy buns, some rice and little or no meat. Two-RMB liters of beer, local white lightening and cigarettes are their luxuries. Watching TV and playing cards in the park with friends is their entertainment.
Working class
China’s working class, the largest group, individually earns between 1,500 to 4,000 RMB ($225 to $600) monthly with a total yearly household income of between 36,000 to 70,000 RMB ($4,800 to $10,500). Generally, they work in beauty salons, restaurants, homes as salespeople, waiters, housekeepers, drivers and nannies. They will often receive housing as part of their compensation from their jobs. Others work for corporations and the government. They will use electric scooters, the bus and the subway for transportation and occasionally a taxi. Diet is meat and vegetables with rice and noodles every day.
Middle class
China’s middle class individually earns 4,000 to 20,000 RMB ($600 to $ 3,000) a month and have a household income of between 50,000 to 150,000 RMB ($7,500 to $22,500) a year. They are mid-level professionals, young expats who work for large corporations and higher level government officials. Some get housing as part of their compensation. They eat well, mostly at home, window shop a lot, but buy wisely. They are under enormous pressure at their jobs where they are expected to put in long hours six days a week. They may have a scooter or a cheap car or be saving every penny to buy a house.
Upper middle class
China’s upper middle class individually earns earn 20,000 to 50,000 RMB a month and have a household income of between 240,000 and 600,000. They work as upper level managers, owners of small businesses and senior professionals. A certain amount of their income is grey market and not reported. If married, the wife may or may not work. They have a house, a car or two, live in or daily household help and perhaps a driver. They take vacations regularly but are also under extreme pressure to produce at their jobs. Their net worth will be between 200,000 to 2,000,000 RMB. Their main asset is their home. While they have enough to live comfortably, they are constantly striving to break into higher income brackets and acquire more wealth.
Junior wealthy
Next are Chinese junior wealthy, who have individual annual income of 600,000 to 2,000,000 RMB. They are business owners, executives of large corporations, celebrities and second- generation wealth. They buy luxury cars and have at least two. Status is very important and they spend a lot of time reading magazines and discussing which brands are best. Their clothes are expensive off-the-rack brands, bought at high-end shopping malls or while they were traveling abroad. Gift giving and relationships are important, as well as their reputation among their friends. Many do not need to work. Most are married and some are divorced.
New senior wealthy
Then we have the Chinese new senior wealthy: They have incomes which start at 2,000,000 RMB ($225,000) and go up from there. According to one report, there are 55,000 people in China who have a billion RMB in assets. They own multiple businesses or control powerful interests. They will have three or more cars, collections of expensive watches and travel extensively. Many are younger than 40 years old. Some are workaholics. Others spend their time amusing themselves. They may or may not be divorced, but their private lives may be somewhat complex. Children are shipped off to private boarding schools, either in China or increasingly overseas. Some are paranoid and others complacent about their wealth and ability to keep it. Those who worry have generally taken the precaution of getting a foreign passport.
Their greatest fear is being ranked on the Forbes wealthiest list, as it will ruin their anonymity and make them a target for either the government, hucksters and/or opportunists (some might argue there is little difference between them).
What does it all mean? You will see that China and the West are not that different in terms of the lifestyles and pressures people feel at each level of the economic scale. The difference is that China is a country which was founded on and still maintains communist/socialist idealism. The very class struggle which the revolution was supposed to eradicate is now alive and flourishing in its cities.
Eventually, this could create a backlash which could also impact foreign business interests in China. So, as you go about plotting your China strategy, keep in mind that while the relative costs are low in China, it is still a new country which has grown quicker economically than it has socially.
