In today’s China under the rule of the Chinese Communist Party (CCP), the economy is in decline and society is restless, directly affecting the living conditions of the middle class, leading to feelings of anxiety and helplessness spreading among them.
As we enter 2024, the phenomenon of “middle-class poverty return” has become a hot topic, with their situation serving as a barometer of the current state of the Chinese economy.
According to data from the CCP’s Ministry of Finance, personal income tax in the first quarter of 2024 amounted to 424 billion yuan, a year-on-year decrease of 4.5%, attributed to salary cuts and increased unemployment. The downsizing of public servants, layoffs in banks, salary reductions for teachers, among others, are eliminating the middle class industries that were once thriving.
Currently, on the internet in mainland China, there is talk of the “Five-piece Set for the Middle Class to Return to Poverty,” reflecting the harsh reality.
This “Five-piece Set” includes: impulsive investment in starting businesses, depleting savings to buy property, elite education for children, acting as a guarantor for others, and blind investment in financial products. Financial disasters, plummeting house prices, stock market declines, income reductions, bonus cuts, and a drop in the prices of various collectibles are hitting the middle class from all angles.
In a society, the more middle class there is, the more stable the society becomes. Conversely, a decrease in the middle class signifies an increase in wealth disparity, widening differences in demand among social groups, and a rise in social conflicts.
Xu Jie (pseudonym) from Changchun, in her fifties, started from scratch with her husband in the hotel supplies industry when she was 20. They worked together for over a decade, but eventually went their separate ways, with her husband leaving the entire company to her. Over the past twenty years, she managed the business on her own, even remarrying and divorcing in the meantime, and has a daughter in her fourth year at a university in Macau.
After years of hard work, she managed to enter the middle class. At the peak of her business, her annual income could reach nearly a million, with the company having over ten salespeople and running two storefronts for hotel supply showcases. However, in recent years, with the development of the internet, the operation of physical stores has declined. Ultimately, she decided to give up the business and live off the rental income from two storefronts, a garage, and four rental properties.
During an interview with a reporter from Dajiyuan, she lamented that now she couldn’t do anything without losing out in the end, no matter what she invested in. Not investing turned out to be the best way to protect her assets. However, due to the collapse of the real estate industry, the value of her properties shrunk, with her estimating losses of over a million yuan.
Xu Jie owned a two-bedroom apartment in a decent location, valued at 650,000 yuan before the epidemic. She had considered selling the property back then, but now, in hesitation, the same property is worth only 450,000 yuan. She listed it for sale at the reduced price but has received no inquiries from potential buyers yet.
She mentioned that her income has noticeably shrunk. During the epidemic, with the storefronts closed due to lockdowns, everyone was struggling. She reduced the rent for tenants, but even as their contracts expired, she hesitated to raise the rent, as the economy is not thriving, with many storefronts on the street vacant. Having tenants in her storefronts was already considered lucky; at least she could count on nearly 200,000 yuan in annual income.
Apart from the shrinking property values, in recent years she also invested in financial products like funds, with tens of thousands of yuan going down the drain. She said, “Investing now is very difficult. Banks’ (financial products) regulations stipulate that the term ‘capital protection’ cannot be used, and all the information provided during the purchase process must be recorded. I dare not invest anymore.”
Xu Jie also dabbled in stock trading, but now, she is unwilling to check stock prices on her computer, having lost over 400,000 yuan. She mentioned that she might be one of the more conservative losers, merely playing around with investments.
She disclosed that a daughter of her daughter’s classmate from Chengdu is studying in Hong Kong. Her parents were also middle class, but suddenly ran out of money, forcing the daughter to study and work part-time.
“Nowadays, the middle class in China is very anxious. They are afraid to spend money, unable to increase their income, only able to cut expenses. Even when buying things for my daughter, I have to think twice before doing so, unlike in the past when I would buy her anything she asked for. I can’t afford to take losses anymore. Being without a mortgage or a car loan is the most relaxing feeling for me now,” she said.
Xu Jie joked about how she had already embraced the concept of “lying flat.”
Lu Bin (pseudonym) from Yiyang City in Hunan Province is a drum opera performer. A few years ago, the drum opera performance market was thriving, but since last year, the government has restricted performances in rural areas. Both he and his famous master now have very little to do and are in a state of uncertainty. He has begun studying the Book of Changes to find some peace of mind.
He mentioned that several wealthy middle-class individuals around him are also expressing discontent and growing anxiety. “They say that they now refuse to work, invest, or start businesses, choosing instead to save money, live modestly, and slowly enjoy life to sustain themselves. But whenever they make a move, invest, they are bound to lose money. With so many traps now, everyone is more wary.”
Independent writer Zhuge Mingyang told Dajiyuan, “As the middle class, they seem to believe that China’s economy should always be booming, treating the economic situation before the pandemic as the norm. Therefore, when China’s economy rapidly deteriorates under the leadership of Xi Jinping, the ‘Chief Accelerator,’ the middle class cannot accept it. Confusion, anxiety, and being at a loss all follow.”
Data from the People’s Bank of China shows that as of February this year, Chinese household savings have reached 19.83 trillion US dollars, hitting a historic high. This indicates that people are hesitant to spend freely, with their consumer confidence at its lowest in decades.
Recently, economist Cheng Xiaonong analyzed in his article “The Wealth Gap Truth of China’s Middle Class” that the current household mortgage debt of China’s middle class amounts to at least 36 trillion yuan, with an average household burden of 1.2 million yuan. Looking at repayment terms, if a middle-class family has an average monthly income of 5,000 yuan per person, with an average monthly household income of 15,000 yuan, using nearly half of that income for repayment means the maximum monthly repayment capacity is 7,000 yuan, amounting to 84,000 yuan annually. With the current average household mortgage debt, they would need another 14 years to repay. From now on, even without unemployment or salary cuts, China’s middle-class families will not be able to buy another house for the next 14 years.
He also noted that China’s current economic decline is actually triggered by a debt economy, leading to economic bubbles. Once the bubble bursts, not only will the economy experience long-term decline, but the middle class will continue to shrink, incomes will decrease, resulting in what is known as “de-middle-classification.” If the current downward trend in house prices continues for another two years, the middle class’ property holdings will become “negative assets.”
Historical scholar Li Yuanhua, currently residing in Australia, told Dajiyuan that unlike Western societies, the proportion of the middle class in China is very small. Over the past several decades, the biggest beneficiaries of China’s economic “takeoff” are interest groups, who have seized a significant portion of societal wealth or have engaged in substantial corruption.
“The core anxiety of the middle class lies in the collapse of the economy. They are opting to ‘lie flat,’ which is indeed a good way to protect their assets,” he said.
Former Beijing lawyer and chairman of the Canadian Alliance for Democracy, Lai Jianping, also told a reporter from Dajiyuan that China’s middle class is a class without rights, possessing some wealth and a moderate social status. They share a common anxiety – firstly, fearing that the entire society won’t progress, will lose direction and prospects, suggesting that their economic status is hard to maintain.
Secondly, they are afraid the Chinese society will regress further, indicating that economic life will further deteriorate, perhaps going from middle class back to low-income or even impoverished.
Thirdly, they fear that their basic rights won’t be protected, as whatever little freedom they had personally will be lost.
He stated that in all aspects, be it political, economic, cultural, or social, they are the most fearful and anxious group. If the Communist system remains unchanged, none of these issues will be resolved.