There has been a lot of speculation about China having reached the Lewis Turning Point; the theoretical point when excess labor dries up and rapid increases in wages drives prices and inflation
Pioneered by Sir Arthur Lewis, Nobel Prize-winning economist during the mid-1950s, the theory was based on classical economic assumptions about the nature of investment, supply and demand. Sir Lewis’ theory was meant to apply to economies which were attempting to move from a “subsistence,” “informal,” “traditional,” “agricultural” or “rural” economy like China, to a “capitalist,” “formal,” “modern,” “industrial” or “urban” form like the United States.
Sitting in a country that has 500 million people living on less than $2 U.S. a day, it seems strange to suggest that excess labor has dried up, but the reality, as usual, does not follow theory.
Below is a list of facts, compiled on www.china-mike.com, which details the reality of a rapidly shifting China. A nation where rising wages and disposable income is changing expectations, economic realities and therefore opportunities.
Between 1981 and 2005, an estimated 600 million Chinese people moved out of poverty (U.S. $1/day) and China’s poverty rate dropped from 85 percent to 15 percent.
Between 1978 and 2007, China’s per capita rural net income increased from 133RMB to 4,140RMB; China’s per capita urban disposable income increased from 343RMB to 13,785RMB; per capita rural housing space increased from 8.1 to 31.6 square meters; and per capita urban housing space increased from 4.2 to 22.6 square meters.
Between 1985 and 2007, China’s ownership of color TV per 100 families increased from 0.8 to 94.4 (rural families) and from 17.2 to 137.8 (urban).; and China’s ownership of refrigerator per 100 families increased from 0.1 to 26.1 (rural families) and from 6.6 to 95 (urban).
Between 2000 and 2007, China’s car ownership per 100 families increased from 0.5 to 6.06.
Here are some more statistics to ponder about China.
China has more people who aspire to own a car, but currently do not, than any other country in the world, according to the research company AC Nielsen.
Only about 20 percent of Chinese own a credit card, according to a CCTV survey.
China has a 38 percent savings rate, one of the highest in the world — due in part to the fact that there is no national safety net. Other savings rates: India (34.7 percent), Germany (11.7 percent), Britain (7 percent), United States (3.9 percent) and Australia (2.5 percent).
China has about 150 million people living below the United Nations poverty line of one U.S. dollar a day. Nearly 500 million Chinese people live on less than $2 a day.
According to the China Development Research Foundation, 85 percent of China’s poor live in rural areas, with about 66 percent concentrated in the country’s west.
Ninety-nine percent of China’s poor live in or come from rural areas, according to national statistics, which count migrant workers in cities among the rural, not urban poor. Even if migrant workers are excluded from the rural population, 90 percent of poverty is still rural.
Over half of China’s population lives in rural areas…but they share less than 12 percent of the country’s wealth.
Levels of poverty are higher and more severe in China’s western regions, but nearly half of the poor are in other parts of the country.
China has about 55 million middle-class households, according to McKinsey & Company, which wrote: “That number could more than quadruple to nearly 280 million in 2025, to account for more than three-quarters of all China’s urban households.”
China ranks #53 worst worldwide in terms of income inequality, with a Gini index (measuring wealth inequality) of 41.5. In comparison, the U.S. ranks #40 worst with a Gini index of 40.
In the mid-2000s, China’s top 10 percent of the population controlled 45 percent of the country’s wealth.
The average annual income in China’s cities is now more than three times the average income in the countryside, according to the National Bureau of Statistics. China Daily, the government-run newspaper, reported that it was the widest disparity for more than three decades.
China now has more billionaires (128 in 2011) than any other country except for the United States (412 in 2011).
Over half of the world’s top 20 richest self-made women are Chinese, including the top three richest.
Chinese millionaires are on average 15 years younger than their overseas peers.
Real estate and manufacturing together make up more than half of China’s wealth creation among the richest Chinese individuals.
China is expected to be the world’s largest luxury good market for the next decade.
About 55 percent of the luxury goods bought by Chinese people are bought outside mainland China.
These facts give you a picture of China’s asymmetrical development. Finding opportunities is up to you.
