China’s economy continues to be sluggish, with both the real estate and stock markets plummeting, leading to layoffs, wage cuts, shrinking wealth, and downgraded consumption among the middle class. They are also facing increasingly strict social controls without the protection of rule of law and political guarantees, leading to growing discontent among China’s middle class who are now seeking to challenge the Communist regime.
In June this year, an article published by the American magazine Forbes pointed out three reasons for the disappearing middle class in China: a sharp decline in personal income tax revenue reported by the Ministry of Finance, the most severe wage drop in recent times, and poor sales performance in the luxury goods industry.
According to data from the Chinese Ministry of Finance, national personal income tax revenue in the first half of this year was 735.8 billion yuan, a 5.7% decrease compared to the same period last year. The fact that the personal income tax starts at 5,000 yuan indicates that the decrease in tax revenue reflects a reduction in income or unemployment among the middle class in China.
A survey by Bloomberg reveals that wage income in China dropped by 1.3% in the fourth quarter of 2023, marking the third consecutive quarter of decline, with bonuses decreasing by an average of about 17.5% compared to the previous year.
The piano has long been a symbol of social status for the middle class, but piano sales have plunged dramatically, leading to the closure of numerous manufacturers, reflecting the plight that China’s middle class is facing.
Data from the People’s Bank of China shows that as of February this year, household savings in China reached a record high of $19.83 trillion, indicating a lack of consumer confidence and a reluctance to spend money in recent years.
Taiwanese economist Wu Chialung pointed out that for the middle class to grow and thrive, continuous economic growth is essential. However, with China’s economy already in decline due to bursting real estate bubbles and the US-China trade war, job opportunities are rapidly disappearing, causing many to lose their jobs and affecting the income of the entire middle class.
Associate Professor of the Department of Political Science at National Taiwan University, Chen Shimin, expressed his belief that since Xi Jinping took office, especially in the past five years, his economic policies have significantly stifled China’s economic innovation and growth potential.
“The current trend of impoverishment among the middle class, with declining assets and salaries, is gradually leading to fewer people in China fitting the typical definition of middle class.”
The rising middle class in China is one of the most anxious and insecure groups in society, working tirelessly but lacking the legal and political protections found in Western societies. With the economy on the decline, it is the middle class who are the first to lose job opportunities and wealth.
In China, 70% of household wealth is tied to real estate, with approximately 219 million individual investors accounting for about 60% of total trading volume in 2022. However, whenever the Chinese property and stock markets fall, it becomes a nightmare for the middle class.
In December last year, the average housing price in 70 major Chinese cities dropped by 6.3% compared to the previous year, marking the largest decline since 2011.
Since dropping below 3,000 points in late October last year, the Shanghai Composite Index fell below 2,900 points in early January this year. Despite efforts during the third plenum held in July to boost the stock market, the index remained below 2,900 points after the meeting.
Wu Chialung explained that once the middle class’s income exceeds daily expenses, they typically start saving, investing in stocks, real estate, and financial products. However, in China, property rights are not adequately protected, leading to concerns as homeownership only grants a 70-year lease, creating uncertainties for the future. In contrast, countries with the rule of law provide better protection for real estate assets.
He emphasized the importance of complete and transparent financial information in the stock market, stating that without proper rule of law, there will be rampant fraud and collusion between officials and businessmen, ultimately leading to the erosion of wealth from the middle class.
The emergence of the Chinese middle class was closely tied to the booming industries of internet technology, real estate, and education assistance at the beginning of this century, fostering numerous private enterprises and middle-class individuals. However, without fundamental protection of the rights of the middle class, they could face the fate of erasure.
Wu Chialung pointed out that the Communist regime’s theoretical foundation emphasizes the abolishment of private ownership in favor of public ownership. Therefore, the lack of legal protection for private property rights has only heightened the risks faced by the middle class in China.
“If the entire society lacks a middle class, and the mainland becomes a society of proletarians, the Communist Party would be the sole exploitative class, reverting to a state resembling the Cultural Revolution.”
The unpredictable political risks in China present another significant concern for the middle class. Currently, the Communist Party’s top priority is political security rather than the economic welfare of the people.
Chen Shimin highlighted the problem of Xi Jinping’s autocratic rule without a system of checks and balances, leading to potentially flawed economic and political policies, such as “national advancement while civilians retreat” and the pursuit of “common prosperity.”
“The root of China’s economic problems lies in shrinking consumption, and yet Xi aims to promote new productive forces by subsidizing electric vehicles, increasing supply despite the issue of shrinking consumption, ultimately worsening the country’s economic problems.”
Recent data from “Freedom House,” a non-profit organization in the United States, and their network “CDM,” revealed that there were 805 dissent events recorded during the second quarter of 2024, an 18% increase compared to the same period in 2023.
With over 6,300 dissent cases in China since June 2022, more than 2,800 protest activities were related to the real estate industry.
This surge in dissent events is seen as a crucial warning sign of middle-class engagement in rights protection and protests.
Chen Shimin emphasized that economic deterioration has always been a significant factor triggering social change, leading to outbreaks of public discontent that may eventually reach a point where the Communist Party can no longer control effectively.
“The gradual contraction and return to poverty of the middle class will stir up social upheaval.”
In such circumstances, the middle class is likely to harbor resentment and begin questioning the causes behind their financial losses and unemployment, eventually understanding that it stems from the Communist system, motivating them to fight for their political and human rights, challenging the one-party rule of the Communist Party of China.
“Without a middle class, the mainland becomes a society of proletarians, and the Communist Party could potentially become the sole exploitative class, turning back to begin exploiting the proletariat.”