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Widely reported this week is news the Chinese economy will outpace the American economy in less than a decade.
China’s year-on-year average growth of 7% for the past decade has been nothing short of remarkable. Each year, market analysts globally have questioned if China can continue this historic economic expansion.
Kris Sayce, reasoned it was like America taking over from the United Kingdom in the late 19th century:
‘…there’s no denying that China’s growth story over the past 10 years has been nothing short of astounding. But can the growth continue?
‘Well, we’re sure there were plenty of folks who doubted the sustainability of American growth in the 1870s. And yet that proved to be the beginning of 142 years of dominance.’
However, China’s economic growth has long been because of central planning.
And in the long term, the central planners want their citizens to take their recent urbanisation, and apply some Western style principals of consumption-at-all-costs.
In other words, get the Chinese people to create a consumption driven economy with the Middle Kingdom’s government still in control.
However, that may not be feasible. The problem is the dynamics of China’s middle class is changing…
China’s middle class doesn’t look like it used to.
The demographics in China are changing.
For a long time, the middle class in China were a happy lot. And the upper middle class in China were the happiest.
This is because the upper middle class of China was mostly filled with officials, former officials, or those with links to government officials that benefited them.
However, thanks to China’s urbanisation, the composition of the middle class is changing.
Right now, the upper middle class (those with an annual income of 106,000–229,000 yuan) account for about 14% of the urban population. In contrast, 54% make up the mass middle class.
Like I said before, for a long time this part of the population had links to the government that benefited their lives. So up until now, there’s been no real demand for change.
Read the rest of this article at Money Morning