China’s Middle Class

An emerging social group

Middle Class

• Originally, those inhabitants of medieval towns in France who occupied a position somewhere between the peasants and the landowning nobility were referred to as Bourgeoisie

• The bourgeoisie later became synonymous with the middle class.

Wealth & Democracy

• Independent middle class was associated with democratization in history

• However, there is no necessary connection between economic prosperity and democracy

In China

• Modernization had already started well before the reforms– modernizing state system and bureaucracy– most of GNP derived from industries– substantial service sector in economy

By late 1950s

• Party-state controlled almost all industry and commerce

• Petty commodity economy remained– marginal– low status– legally tenuous– politically risky

By 1970s

• Public versus private interests

• Public was increasingly dominated by empty ideological rhetoric and ritualistic action

• Private consisted in the promotion and discussion of particularistic interests through the back door and in the back alleys of the system

In Reform Era

• Reform measures and economic growth have since brought about– endorsing the pursuit of private material

interests– greater economic and social diversity and

political openness– remarkable individual wealth to certain groups

of people

Late 1970s & Early 1980s

• Private production and commerce were legalized

• Individual (or household) enterprises [geti]– small operations (less than 8 employees)– officially sanctioned as a “necessary

supplement to the socialist economy”

• 32 million geti employed 66 million people by the end of 2009

Late 1980s

• Private enterprises [siying]– each has more than 8 employees– recognized and confirmed by Zhao Ziyang– legalized by constitutional amendment in

1988 as a ``supplement to the publicly owned economy”

– investors have property ownership and inheritance rights

From 1999 to 2009

• Private enterprises [siying]– increased from 1.5 million to 7.4 million– investors increased from 3.2 million to 16.5

million– employees increased from 20 million to 86

million

• Since 1992 siying GDP grows at 60% a year and tax grows at 80% a year

Employees of Urban Household & Private Enterprises (in millions)

0

5

10

15

20

25

30

35

40

45

1978 1980 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002

Employees in Private & Household Enterprises (2009)

Actual Size of Private Sector

• Official figures understate the real size and significance of the private economy in China today– confusion in classification of township and

village enterprises– intentional obfuscation by entrepreneurs or

officials– difficulty in classifying new hybrid forms of

enterprises

New Middle Class

• Owner-operators– private entrepreneurs

• Managers– state capitalists– social capitalists– suburban executives

• Service providers

State & Middle Class

• Party-state remains central to China’s economic development and to its emerging new middle class

• Middle class of the reform era have emerged from within the local ``establishment”

Socially & Culturally, ...

• Socially, the new middle class are characterized by intense parochialism– remarkably limited social mobility– identification with native place

• Culturally, the new middle class are trendsetters, especially in consumption patterns

Politically, ...

• The new middle class are not alienated or independent from the party-state

• They operate in close proximity and through close cooperation with the party-state

• In a 1997-1999 survey at 4 counties, 16% of private entrepreneurs had run in village elections

Private Business

• Change in the rhetoric:– marginal => ``supplement” => ``necessary

supplement” => ``necessary component” => ``organic part”

• Economic justification:– create jobs (3/5 of new firms, 1/5 of new jobs)– pay taxes– donate to charitable causes

``Three Represents”

• A CCP document in 1989 barred private entrepreneurs from entering the Party

• Difficulty of implementation at grassroots– in a 1997-1999 survey only 27% of county

officials supported the ban

• In 2001, Jiang Zemin: CCP represents the ``requirements of the development of advanced productive forces”

2002

2001

2000

1999

1998

1997

1996

1995

1994

1993

1992

1991

1990

1989

1988

% a

mo

ng

pri

vate

en

tre

pre

ne

urs

30%

25%

20%

15%

10%

5%

0%

30

20

1717

13

8

15

CCP Members