Tuesday, August 13, 2013

The emerging Chinese middle class

Chinese dream: As people pour into the cities, they bring with them millions of dollars worth of growth – and issues such as pollution and overpriced housing. china Lucy Wu, who moved to Shanghai from New Zealand, says she sees in her friends the stress that comes from wanting to succeed. Asia A 500 metre tower is growing out of the park where Lucy Wu, 28, used to catch the ferry across Shanghai's Huangpu River to play on the green grass with her father. When she moved with her family to New Zealand 20 years ago the Pudong area was underdeveloped agriculture land. It is now the heart of Shanghai's financial district and the city's most exclusive neighbourhood. China was once the world's most powerful economy. As late as 1820 China produced a third of the world's GDP. But when it failed to harness the industrial revolution, the West rose and China sank. By 1979 China's share of global economy was around 5 per cent and income per capita was just $260. So Wu's family moved to New Zealand to find more freedom and opportunity. "Twenty years ago, China was a very communist country, it was like North Korea," said Wu with an obvious Kiwi accent. But soon after her family migrated things began to change fast. When China opened to foreign trade and economic reform at the end of the 1970s, a 30-year period of remarkable growth lifted China to the world's second largest economy by 2010. This economic miracle was built on exports. Now, the growth will be fed by domestic consumption as millions of Chinese are lifted out of poverty and thrust into middle class with disposable incomes and aspirations for a happier, healthier life. China is still poor. More than 900 million, mostly rural, people still live on less than $5 a day, according to the World Bank's latest statistics. But for every peasant who moves to the city, there is an immediate injection of around $2000 to the domestic GDP. And with 10 million people moving to cities every year, urbanisation alone adds $2m of growth. China's President Xi Jingping calls this the Chinese Dream. His vision is as hazy as Beijing's sky, but the mission of a moderately prosperous nation by 2020 has captured the imagination of the Chinese people. A demographic whose parents were condemned to poverty can now see a China with stable jobs, good education for their children and a chance to live a more enjoyable life. A T A grubby supermarket half an hour from the bling of central Shanghai you can see the Chinese Dream. On the ground floor, Fonterra saleswomen scan the bone health of customers, customers who are much more likely to suffer from bone disease than their western counterparts. Up the escalator posters of Bond Girl Michelle Yeoh line the walls, selling Anlene, Fonterra's high calcium milk that can help prevent osteoporosis, to people who could never afford dairy in the past. The milk is sold in gift packs, which young, newly affluent, urban Chinese take home to their parents as presents on Chinese New Year. Bakeries are popping up around Chinese cities, the reciprocal version of Asian takeaways stores in the West. "They are all getting wealthier, not just in money sense but in world sense," said Kelvin Wickham, Fonterra China's managing director. Ad Feedback Wu moved back to the pace of Shanghai three years ago to work as business analyst for Fonterra China. "Things I experienced in the first six months here work wise, it would have taken me two years in New Zealand," she said. Her parents' life was regimented and restricted. Now China is open and free, far beyond Western perceptions, she said. Last year she went to a J Lo concert where the crowd knew every word. In May, the Backstreet Boys played took their comeback tour to Shanghai. But in such a rapidly moving mass, Wu sees pressure on her friends to succeed. Especially when the one-child policy means you are the sole output of your parents. If you are successful it is a sign they were successful. Her parents' friends in China call them in New Zealand asking why Wu hasn't got married. "When I first came to China I was 25. I felt fine in New Zealand. There were no pressures, we were all single girls having fun. I came to China, and all of a sudden I was old," she said. A CHILD IS also a significant investment. Education is expensive. And with the privatisation of the health sector and insurance sectors a wealthy child is the most secure retirement plan. Sitting with a double espresso in Beijing's Flat White Cafe, Jingyang Li is happily in the middle of the middle class. He is one of its lucky members. At 32 he is married, he has a newborn son, runs his own Mandarin Language school with 20 employees. His family has two homes in Beijing. One bought with a bank loan he will spend the next 20 years paying back, one gifted to his wife by her grandparents. They live in a good neighbourhood with good schools. "My life is better than my parents, and I think my son's will be better than mine," he said. But he sees many people struggling to make a new life in urban China. His sister moved to Beijing for greater opportunity, but her son does not have a Beijing ID card. This means education and health services are harder to get and more expensive. Li seems guilty his son has a local registration. As urbanisation increases, house prices in the cities - especially in areas with good schools - have become unaffordable. Government intervention in Shanghai and Beijing, including limiting married couples to owning one property, increasing minimum deposits for loans and a 20 per cent capital gains tax, have failed to relieve the property market. The cities are crowded and the pollution is real. The Beijing sky glows purple behind the smog and China's air pollution was linked to 1.2 million premature deaths in 2010, by the Global Burden of Disease Study. Food crises seem to crop up in the news each week. The people have growing power to get want they want in China. The middle classes appear happy to wait for political rights, but they want clean air now. They will pay a premium for safe traceable food and beverage. A savvy and active online community build and break brands' reputations. Launched on Friday, the NZ Pure Shop is an e-commerce platform selling New Zealand-made food and drink directly to China through its most popular online retailer, Tmall.com. The online store will reach more than 500 million registered users, selling Marlborough King Salmon, Sanitarium and Nelson Honey, in the hard to reach corners of China. China is becoming more and more aware of New Zealand's brand story of reliability and quality, said Aldo Miccio, chairman of NZ Inc Shop. "I think it is pretty cool that people are in China having Weet-Bix and New Zealand milk for breakfast," Miccio said. The middle class in China is still relatively small. "Mainstream consumers", those earning between $22,000 and $46,000 a year, made up just 6 per cent of the population in 2010, according to management consultants McKinsey & Co. This is still 80 million people. But if growth continues at its current rate, the current lower middle class will change the world. Within 12 years the world's middle class will double based on China's growth alone, according to John Ross, senior fellow at Chongyang Institute for Financial Studies. In China hundreds of millions of people will own a car, domestic and international tourism will become high priorities and life expectancy will increase as access to a good diet becomes universal. "If you look at the point of view of sheer numbers, the effect is going to be incredible. By then you will have a middle class of hundreds of millions," said Ross. China's growth still amazes Lucy Wu every day. "Look at how fast that Shanghai Tower is built. Every time I go across there it seems bigger," she said. Due to be completed in 2014, The Shanghai Tower will be 632 metres high, the world's second highest building. By 2030, and probably even earlier, the emerging middle class will again make China the world's largest economy. This is the third in a series of stories by Simon Day, who is in China to report on the growing relationship with our No 1 trading partner. Simon Day travelled courtesy of the New Zealand China Friendship Society. SIMON DAY Last updated 05:00 09/06/2013 http://www.stuff.co.nz/world/asia/8768722/The-emerging-Chinese-middle-class

No comments: