China’s Middle Class Is a Myth

A nation’s wealth is gauged by its gross domestic product (GDP), the total value of all finished goods and services produced in a country during a given period. The United States boasts the world’s highest GDP at $25.462 trillion, with China in second place at $17.963 trillion.

While China ranks as the second-richest country globally by GDP, this metric doesn’t provide insight into the average citizen’s quality of life. To gauge this, we divide the GDP by the population to derive the GDP per capita, offering a broad approximation of the average person’s income. The United States holds the 8th position, boasting a GDP per capita of $75,269, whereas China ranks 72nd, with a per capita GDP of only $12,598. This places China significantly behind developed nations like Singapore and Japan and even lags behind countries such as Lithuania, Estonia, and Spain, all with a per capita GDP more than twice that of China.

There is a measure called purchasing power parity (PPP), favored by the Chinese Communist Party (CCP) and China apologists, who argue that lower prices in China amplify the buying power of its citizens, making them better off despite having a lower nominal salary. To some extent, they have a point. For example, men can still get a $5 haircut in Shanghai, while finding one below $20 in New York is challenging. However, the rent-to-income ratio in New York is 68.5 percent, indicating that the average rent constitutes a staggering 68.5 percent of the average salary. In Shanghai, this ratio is even higher at 90 percent. Therefore, although nominal prices are higher in New York, the cost is lower relative to income. This difference becomes even more extreme when buying an apartment, with the average home price in Shanghai being 50 times the average salary, whereas in New York, it is only 10.5 times

Education represents a significant expense for Chinese families. In the United States, only around 9 percent of children attend private schools, and a smaller percentage receive paid tutors or supplemental education, typically for a limited time. In contrast, in China, most children attend supplemental lessons, with 30 percent of parents reporting monthly costs ranging from $140 to $400.

Another area where PPP measures fall short is in imported goods and raw materials, which are priced in nominal U.S. dollars, making them more affordable for the average American. For example, Chinese consumers have a penchant for American cars. However, even excluding import duties and taxes, the average American car costs almost four years’ worth of income for a Chinese consumer while representing just over half a year’s salary for the average American.

Furthermore, the contrast extends to education. Most Americans do not feel the need to send their children abroad for education, whereas the United States has been the primary destination for Chinese families. Foreign students pay up to triple the tuition, plus living expenses in the United States, amounting to an average of $100,000 per year.

In addition to the fact that many necessities cost proportionately more than the average income in China, the average person does not earn the average income. The Gini coefficient measures income disparity in a country on a scale of 1 to 100, where 1 would signify complete equality. In 2022, China scored 46.7, making it more unequal than most of Western Europe or Japan.

According to data from China’s National Bureau of Statistics, in 2015, the top 20 percent of earners made 5.3 times more than the bottom 20 percent. However, by 2022, this gap had widened, with the richest 20 percent of urban households earning 6.3 times that of the poorest 20 percent. In rural areas, the gap was even greater at 9.2 times. Nationwide, the wealthiest 1 percent of the population holds more than 31 percent of the country’s household wealth.

China claims the title of the world’s largest middle class, with nearly half a billion members. However, the majority of China’s middle class is not as affluent as that in developed countries, as 75 percent of them earn $10 to $20 a day. Consequently, approximately 60 percent of the Chinese population lives on $2 to $10 per day.

Chinese leader Xi Jinping and the CCP often take credit for lifting 800 million Chinese out of poverty. However, one must question why China initially had such a large number of people living in poverty. Instead, the CCP could have relinquished control over society and the economy, allowing living standards to naturally rise through free markets, as seen in the United States and other developed countries