Chinese Economics Thread
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Hendrik_2000
Lieutenant General
Over the past several decades, China’s economic development has lifted hundreds of millions of Chinese out of poverty and resulted in a burgeoning middle class. Middle class households typically have enough income to satisfy their primary needs – food, clothing, and shelter – with some disposable income left over for additional desired consumption and savings. In 2002, China’s middle class was only four percent of its population. A decade later this number had climbed to 31 percent, constituting over 420 million people. China’s growing middle class presents an array of new economic opportunities, but also poses significant political and demographic challenges.
Defining China’s Middle Class
China’s ongoing development has created new economic opportunities in its cities, prompting hundreds of millions of rural Chinese to migrate to urban centers. In just a few decades, China’s urban population skyrocketed from of the total population in 1980 to 56 percent in 2015.
As Chinese workers have flocked to cities, wages have grown substantially, from 2001 to 2015. Rising wages have led to a steady increase in China’s Gross National Income (GNI) per capita, which now stands at . This figure falls between the per capita income of other developing countries like South Africa ($12,100) and Brazil ($14,100), but is significantly lower than the $37,900 average of OECD economies.
China’s urban population skyrocketed from 19 percent of the total population in 1980 to 56 percent in 2015.
A greater demand for labor in China’s coastal cities has disproportionately driven urbanization in eastern provinces, which has exacerbated significant regional differences. China’s coastal provinces often boast levels than inland provinces even after taking into account the rural-urban income gap. For example, per capita income among urban residents in the coastal province of Jiangsu is ($4,025) for urban dwellers in the landlocked province of Guizhou. China’s major cities – particularly Beijing, Tianjin, and Shanghai – have among the highest levels of Gross Domestic Product (GDP) per capita in the country (each at around $30,000), but are still well below those in developed-economy cities such as .
Importantly, there is no standard statistical definition of a middle-class level of income, but some metrics use bands to distinguish between several different income groups. For instance, the Chinese government defines incomes ranging from ($7,250 to $62,500) as middle class. McKinsey uses a range of ($11,500 to $43,000) per year. To facilitate cross-country comparisons, the World Bank uses a dollar-per-day amount expressed in purchasing-power-parity (PPP) dollars. In 2015, to include four additional income levels.
Class Income Bands
Poor <$2
Low $2 – $10
Lower-Middle $10 – $20
Upper-Middle $20 – $50
High >$50
Since the early 2000s, China’s middle class has been among the fastest growing in the world, swelling from . Compared to other large, emerging market countries this growth is particularly noteworthy, as Mexico’s middle class only grew from 19 to 34 percent (19 to 42 million) and Indonesia’s only grew from 1 to 10 percent (2 to 24 million) over the same time period.
Most of China’s middle-class growth has occurred within the lower-middle income band. China’s middle-class share of 31 percent of its population is similar to that of the Netherlands (32 percent), but differences emerge when breaking down the middle class into its lower and upper echelons. In China, 75 percent of the middle class falls into the lower income category, while in the Netherlands this figure is only 7 percent. Nevertheless, the emergence of a strong middle class may offer an opportunity for greater political participation for a large segment of the Chinese population whose primary needs are now satisfied.
Spending Habits of the Middle Class
The Chinese middle class is beginning to behave similarly to its counterparts across the world by spending income on a range of goods and services. Middle class spending growth has been primarily driven by consumers in the upper-middle income band, which have a significant amount of disposable income. For instance, passenger vehicle sales in China have experienced growth for 26 straight years, with being sold in 2016. For reference, U.S. consumers bought 17.5 million cars in 2016 and Brazilians purchased just 2.5 million automobiles.
Higher incomes have also enabled consumers to be better connected. Since 2006, internet users and mobile phone . China’s internet penetration rate has jumped by a factor of five since 2006 when it was at just 10.5 percent, meaning that in 2016 over half of the Chinese population has access to internet. This number significantly trails the OECD internet penetration rate of 77 percent, but is also considerably higher than India’s rate of 26 percent. Notably, internet penetration rates are significantly higher in China cities. For instance, both Beijing and Shanghai have internet penetration rates around 75 percent. with E-commerce accounting for 15 percent of total private consumption in 2015 – up from 3 percent in 2010. Enhanced connectivity may also provide members of the middle class with an improved means to advocate for social issues through various digital platforms.
Greater economic means have also created new educational opportunities. in Chinese higher education grew from about 5.5 million in 2006 to almost 7.5 million in 2015 – an increase of 35 percent. Students are also flocking overseas for education. from about 285,000 in 2010 to over 520,000 in 2015 – with most leaving to study in South Korea, the United Kingdom, Australia, and the United States. As of 2015, China had over at the tertiary level, more than the next eight countries combined. By comparison, 234,000 Indian and 116,000 German students studied abroad in the same year.
Chinese are also traveling with increased frequency, as evidenced by a rise of over 185 percent in annual Over the same period, annual spending by Chinese travelers grew by over 1100 percent – soaring from $20 billion to over $250 billion – with Hong Kong, Macau and Taiwan the top destinations. Chinese are also traveling further afield to locations like Thailand, South Korea, and the Philippines. Over roughly the same period, tourism spending abroad by U.S. citizens grew by 39 percent to $148 billion and spending by E.U. citizens grew by only 8 percent to $382 billion.
Defining China’s Middle Class
China’s ongoing development has created new economic opportunities in its cities, prompting hundreds of millions of rural Chinese to migrate to urban centers. In just a few decades, China’s urban population skyrocketed from of the total population in 1980 to 56 percent in 2015.
As Chinese workers have flocked to cities, wages have grown substantially, from 2001 to 2015. Rising wages have led to a steady increase in China’s Gross National Income (GNI) per capita, which now stands at . This figure falls between the per capita income of other developing countries like South Africa ($12,100) and Brazil ($14,100), but is significantly lower than the $37,900 average of OECD economies.
China’s urban population skyrocketed from 19 percent of the total population in 1980 to 56 percent in 2015.
A greater demand for labor in China’s coastal cities has disproportionately driven urbanization in eastern provinces, which has exacerbated significant regional differences. China’s coastal provinces often boast levels than inland provinces even after taking into account the rural-urban income gap. For example, per capita income among urban residents in the coastal province of Jiangsu is ($4,025) for urban dwellers in the landlocked province of Guizhou. China’s major cities – particularly Beijing, Tianjin, and Shanghai – have among the highest levels of Gross Domestic Product (GDP) per capita in the country (each at around $30,000), but are still well below those in developed-economy cities such as .
Importantly, there is no standard statistical definition of a middle-class level of income, but some metrics use bands to distinguish between several different income groups. For instance, the Chinese government defines incomes ranging from ($7,250 to $62,500) as middle class. McKinsey uses a range of ($11,500 to $43,000) per year. To facilitate cross-country comparisons, the World Bank uses a dollar-per-day amount expressed in purchasing-power-parity (PPP) dollars. In 2015, to include four additional income levels.
Class Income Bands
Poor <$2
Low $2 – $10
Lower-Middle $10 – $20
Upper-Middle $20 – $50
High >$50
Since the early 2000s, China’s middle class has been among the fastest growing in the world, swelling from . Compared to other large, emerging market countries this growth is particularly noteworthy, as Mexico’s middle class only grew from 19 to 34 percent (19 to 42 million) and Indonesia’s only grew from 1 to 10 percent (2 to 24 million) over the same time period.
Most of China’s middle-class growth has occurred within the lower-middle income band. China’s middle-class share of 31 percent of its population is similar to that of the Netherlands (32 percent), but differences emerge when breaking down the middle class into its lower and upper echelons. In China, 75 percent of the middle class falls into the lower income category, while in the Netherlands this figure is only 7 percent. Nevertheless, the emergence of a strong middle class may offer an opportunity for greater political participation for a large segment of the Chinese population whose primary needs are now satisfied.
Spending Habits of the Middle Class
The Chinese middle class is beginning to behave similarly to its counterparts across the world by spending income on a range of goods and services. Middle class spending growth has been primarily driven by consumers in the upper-middle income band, which have a significant amount of disposable income. For instance, passenger vehicle sales in China have experienced growth for 26 straight years, with being sold in 2016. For reference, U.S. consumers bought 17.5 million cars in 2016 and Brazilians purchased just 2.5 million automobiles.
Higher incomes have also enabled consumers to be better connected. Since 2006, internet users and mobile phone . China’s internet penetration rate has jumped by a factor of five since 2006 when it was at just 10.5 percent, meaning that in 2016 over half of the Chinese population has access to internet. This number significantly trails the OECD internet penetration rate of 77 percent, but is also considerably higher than India’s rate of 26 percent. Notably, internet penetration rates are significantly higher in China cities. For instance, both Beijing and Shanghai have internet penetration rates around 75 percent. with E-commerce accounting for 15 percent of total private consumption in 2015 – up from 3 percent in 2010. Enhanced connectivity may also provide members of the middle class with an improved means to advocate for social issues through various digital platforms.
Greater economic means have also created new educational opportunities. in Chinese higher education grew from about 5.5 million in 2006 to almost 7.5 million in 2015 – an increase of 35 percent. Students are also flocking overseas for education. from about 285,000 in 2010 to over 520,000 in 2015 – with most leaving to study in South Korea, the United Kingdom, Australia, and the United States. As of 2015, China had over at the tertiary level, more than the next eight countries combined. By comparison, 234,000 Indian and 116,000 German students studied abroad in the same year.
Chinese are also traveling with increased frequency, as evidenced by a rise of over 185 percent in annual Over the same period, annual spending by Chinese travelers grew by over 1100 percent – soaring from $20 billion to over $250 billion – with Hong Kong, Macau and Taiwan the top destinations. Chinese are also traveling further afield to locations like Thailand, South Korea, and the Philippines. Over roughly the same period, tourism spending abroad by U.S. citizens grew by 39 percent to $148 billion and spending by E.U. citizens grew by only 8 percent to $382 billion.
Hendrik_2000
Lieutenant General
(cont)
Although consumer financing instruments such as credit cards, mortgages, and automotive loans, which are more commonplace in upper-income countries, are on the rise in China, the savings habits of Chinese consumers have yet to reflect those of their foreign counterparts. Chinese households save a greater share of their income than households in other major economies. As of 2015, the average Chinese household saved about , the highest of any major economy and in stark contrast with savings rates of 5.2 percent and 1.8 percent for the U.S. and Japan, respectively. These saving habits are in part a necessity due to lower levels of social insurance and were historically promoted by the Chinese government as it set up . Today households cite as top reasons for saving money.
Asset allocation in China is also different than other countries. Chinese households of their wealth in their home, averaging 74 percent compared to 51 percent in the Euro area. Moreover, China has an above average home ownership rate of 87 percent compared to 67 percent in the U.S. Its ratio is similarly lower at just 41 percent compared to 80 percent for the U.S.
Social Challenges of the Middle Class
China’s middle class is forecast by McKinsey & Company to and comprise 75 percent of urban households. This continued expansion of the middle class presents a host of new environmental, demographic, and social challenges.
The increased consumption levels of the middle class have contributed to environmental stresses. Rising vehicle purchases, higher gasoline consumption, and urban sprawl is resulting in higher CO2 emissions and elevated . Dietary preferences have also shifted. A rise among the middle class has caused an increase in the intensity of agricultural production and placed a considerable strain on the environment.
McKinsey & Company forecasts China’s middle class to reach 550 million by 2022 and comprise 75 percent of urban households.
This shift in middle-class diets and the sedentary lifestyle often associated with higher income occupations has led to an . Diseases that are of the chronic, non-communicable variety are on the rise in China. These same diseases characterize the populations of developed countries and are often expensive to treat. From 2004 to 2014, healthcare expenditure per capita in China increased by over 400 percent.
Healthcare concerns are further compounded by the fact that . China’s age pyramid is in the process of inverting, with its dependency ratio expected to increase from 36.6 percent in 2015 to 69.7 percent in 2050. Without vibrant working-age adults to support older generations, the rising social security and healthcare costs of older, retired family members is expected to increasingly burden Chinese households.
Inequality also poses a challenge for China. China’s Gini coefficient, a measure of a country’s income inequality ranked from 0 (perfect equality) to 1 (maximal inequality), has almost doubled from in the 1980s to between in 2015, considerably or Japan’s 0.33. While the rise in inequality partially speaks to China’s previous economic impoverishment, it also reflects the imbalanced growth in the Chinese economy.
The government has taken some actions to strengthen China’s social safety net to better handle a range of social issues. For example, Beijing increased average pensions by and also introduced a more general pension that covers workers not participating in the formal economy. Additionally it has extended healthcare coverage to urban non-workers, in fourteen provinces and major cities, and passed measures to expand unemployment insurance to migrant workers where previously their benefits would not follow their move to a new city.
Overall government expenditures on social spending in 2012 from 6 percent in 2007. While significant, this is noticeably lower than the OECD average of 22 percent. Social welfare reform is also part of the government’s attempt to spur middle class spending and reduce high savings rates. Other measures designed to encourage middle-class spending include and .
Although consumer financing instruments such as credit cards, mortgages, and automotive loans, which are more commonplace in upper-income countries, are on the rise in China, the savings habits of Chinese consumers have yet to reflect those of their foreign counterparts. Chinese households save a greater share of their income than households in other major economies. As of 2015, the average Chinese household saved about , the highest of any major economy and in stark contrast with savings rates of 5.2 percent and 1.8 percent for the U.S. and Japan, respectively. These saving habits are in part a necessity due to lower levels of social insurance and were historically promoted by the Chinese government as it set up . Today households cite as top reasons for saving money.
Asset allocation in China is also different than other countries. Chinese households of their wealth in their home, averaging 74 percent compared to 51 percent in the Euro area. Moreover, China has an above average home ownership rate of 87 percent compared to 67 percent in the U.S. Its ratio is similarly lower at just 41 percent compared to 80 percent for the U.S.
Social Challenges of the Middle Class
China’s middle class is forecast by McKinsey & Company to and comprise 75 percent of urban households. This continued expansion of the middle class presents a host of new environmental, demographic, and social challenges.
The increased consumption levels of the middle class have contributed to environmental stresses. Rising vehicle purchases, higher gasoline consumption, and urban sprawl is resulting in higher CO2 emissions and elevated . Dietary preferences have also shifted. A rise among the middle class has caused an increase in the intensity of agricultural production and placed a considerable strain on the environment.
McKinsey & Company forecasts China’s middle class to reach 550 million by 2022 and comprise 75 percent of urban households.
This shift in middle-class diets and the sedentary lifestyle often associated with higher income occupations has led to an . Diseases that are of the chronic, non-communicable variety are on the rise in China. These same diseases characterize the populations of developed countries and are often expensive to treat. From 2004 to 2014, healthcare expenditure per capita in China increased by over 400 percent.
Healthcare concerns are further compounded by the fact that . China’s age pyramid is in the process of inverting, with its dependency ratio expected to increase from 36.6 percent in 2015 to 69.7 percent in 2050. Without vibrant working-age adults to support older generations, the rising social security and healthcare costs of older, retired family members is expected to increasingly burden Chinese households.
Inequality also poses a challenge for China. China’s Gini coefficient, a measure of a country’s income inequality ranked from 0 (perfect equality) to 1 (maximal inequality), has almost doubled from in the 1980s to between in 2015, considerably or Japan’s 0.33. While the rise in inequality partially speaks to China’s previous economic impoverishment, it also reflects the imbalanced growth in the Chinese economy.
The government has taken some actions to strengthen China’s social safety net to better handle a range of social issues. For example, Beijing increased average pensions by and also introduced a more general pension that covers workers not participating in the formal economy. Additionally it has extended healthcare coverage to urban non-workers, in fourteen provinces and major cities, and passed measures to expand unemployment insurance to migrant workers where previously their benefits would not follow their move to a new city.
Overall government expenditures on social spending in 2012 from 6 percent in 2007. While significant, this is noticeably lower than the OECD average of 22 percent. Social welfare reform is also part of the government’s attempt to spur middle class spending and reduce high savings rates. Other measures designed to encourage middle-class spending include and .
Jura The idiot
General
manqiangrexue
Brigadier
So scared of competition. China should shut Apple out of China until the US reciprocates with Huawei.
“Political pressure” reportedly kills Huawei/AT&T smartphone deal
Spying concerns from members of congress means AT&T won't be selling Huawei phones.
- 1/9/2018, 10:50 AM
The Huawei Mate S.
Reports from and other outlets say that AT&T was ready to announce a distribution deal with Chinese smartphone maker Huawei, but the deal fell through at the last minute.
The deal would have seen Huawei phones bundled with service deals in AT&T stores, as carrier stores are the primary way US consumers buy phones. The two companies were ready to announce the deal at the currently ongoing CES trade show in Las Vegas.
Huawei is the number three smartphone vendor worldwide, behind only Apple and Samsung, but the company struggles in the US. Huawei currently sells to consumers online, but the lack of carrier deals has made the company basically irrelevant in the US market. Outside of the US, Huawei is a massive company, making not only phones but also its own line of "HiSilicon" SoCs. The company the largest telecommunications equipment manufacturer in the world, but about Huawei's relationship to the Chinese government has mostly kept its equipment out of the US.
A report from claims that the same "political pressure" situation happened here. Apparently members of the US Senate and House Intelligence Committee sent a letter to the FCC citing a committee report of Huawei's alleged ties to the Chinese government, and the letter said that "additional work by the Intelligence Committees on this topic only reinforces concerns regarding Huawei and Chinese espionage."
Huawei has continually denied allegations that it spies for China.
“Political pressure” reportedly kills Huawei/AT&T smartphone deal
Spying concerns from members of congress means AT&T won't be selling Huawei phones.
- 1/9/2018, 10:50 AM
The Huawei Mate S.
Reports from and other outlets say that AT&T was ready to announce a distribution deal with Chinese smartphone maker Huawei, but the deal fell through at the last minute.
The deal would have seen Huawei phones bundled with service deals in AT&T stores, as carrier stores are the primary way US consumers buy phones. The two companies were ready to announce the deal at the currently ongoing CES trade show in Las Vegas.
Huawei is the number three smartphone vendor worldwide, behind only Apple and Samsung, but the company struggles in the US. Huawei currently sells to consumers online, but the lack of carrier deals has made the company basically irrelevant in the US market. Outside of the US, Huawei is a massive company, making not only phones but also its own line of "HiSilicon" SoCs. The company the largest telecommunications equipment manufacturer in the world, but about Huawei's relationship to the Chinese government has mostly kept its equipment out of the US.
A report from claims that the same "political pressure" situation happened here. Apparently members of the US Senate and House Intelligence Committee sent a letter to the FCC citing a committee report of Huawei's alleged ties to the Chinese government, and the letter said that "additional work by the Intelligence Committees on this topic only reinforces concerns regarding Huawei and Chinese espionage."
Huawei has continually denied allegations that it spies for China.
Jura The idiot
General
Interesting. Seems that China is "asking" for competitors to join the ship of opportunity
Equation
Lieutenant General
So scared of competition. China should shut Apple out of China until the US reciprocates with Huawei.
“Political pressure” reportedly kills Huawei/AT&T smartphone deal
Spying concerns from members of congress means AT&T won't be selling Huawei phones.
- 1/9/2018, 10:50 AM
The Huawei Mate S.
Reports from and other outlets say that AT&T was ready to announce a distribution deal with Chinese smartphone maker Huawei, but the deal fell through at the last minute.
The deal would have seen Huawei phones bundled with service deals in AT&T stores, as carrier stores are the primary way US consumers buy phones. The two companies were ready to announce the deal at the currently ongoing CES trade show in Las Vegas.
Huawei is the number three smartphone vendor worldwide, behind only Apple and Samsung, but the company struggles in the US. Huawei currently sells to consumers online, but the lack of carrier deals has made the company basically irrelevant in the US market. Outside of the US, Huawei is a massive company, making not only phones but also its own line of "HiSilicon" SoCs. The company the largest telecommunications equipment manufacturer in the world, but about Huawei's relationship to the Chinese government has mostly kept its equipment out of the US.
A report from claims that the same "political pressure" situation happened here. Apparently members of the US Senate and House Intelligence Committee sent a letter to the FCC citing a committee report of Huawei's alleged ties to the Chinese government, and the letter said that "additional work by the Intelligence Committees on this topic only reinforces concerns regarding Huawei and Chinese espionage."
Huawei has continually denied allegations that it spies for China.
Same thing happens when the US blocks Huawei and ZTE network vendors away from entering the US market.