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China wants to be a middle-income country without a middle class

Innovation and free thought will boost economy, but politics comes first

| China
An ever-expanding list of off-limit topics -- political, economic, social -- seems designed to empty out the minds of the middle class.   © Reuters

On January 17, Ning Jizhe, Director of China's National Bureau of Statistics, announced that the country's gross domestic product had reached 99.1 trillion yuan ($14.3 trillion) in 2019, and that per capita GDP surpassed $10,000.

This landmark carries significant symbolic importance: economists would now consider China a middle-income country, whose inhabitants have enough money day-to-day and limited disposable income.

Yet while reaching middle-income status is an achievement, China is less keen on having the middle class which usually goes with it. Understanding why it sees the middle class as a threat helps to understand the risks China's economy is facing.

State media outlets generally stay away from using "middle class," a loaded term that conjures up uncomfortable associations with bourgeois and political aspirations which the Chinese Communist Party fought against and overcame through class struggles. The term of art for the government is "middle-income group," or zhongdeng shouru qunti, while pop economists such as Wu Xiaobo use "new middle class," or xinzhongchan.

Why is middle class a sensitive subject? First, in many parts of the world, including the Confucius-influenced Four Tigers of East Asia -- Hong Kong, Singapore, South Korea and Taiwan -- the increasing spending power of the middle class is inextricably tied to greater desire for political participation. Whether China can successfully buck the trend by installing political inertia among its rising middle class is an open question.

Second, the critical mass of the middle class also implies the arrival of the middle income trap, suggesting the inevitable stagnation of the upward trajectory that may undermine the political legitimacy of the ruling party. Will Chinese exceptionalism shield the country from the curse of the middle-income trap?

Chinese politicians want to believe so. Li Peilin, a member of the Standing Committee of the National People's Congress, recently predicted that during the planning cycle of 2021-2025 China would cross the World Bank's threshold of $12,600 for high-income countries.

Yang Weimin, deputy director of the Economic Committee of the Political Consultative Conference, also indicated that the concept of middle-income trap might not apply to China as its economy is primed for sustained growth for decades.

But despite all of these official assurances, anxiety about runaway housing prices, children's education and retirement benefits continue to unsettle China's rising middle class.

As widely cited on the Chinese web, a 2015 Ipsos study of 2,500 households in four Asian economies showed that the Chinese need to earn more than the two of the other three to feel middle class. Out of one thousand mainland Chinese households surveyed, those who considered themselves middle class had an average monthly income of 45,000 yuan, second only to 51,500 yuan in Hong Kong, more than the 39,200 yuan in South Korea and 28,000 yuan in Taiwan.

The question underlying this debate is whether China's quest for to expand its middle-income group is ridden with conflicting impetuses. On the one hand, the middle class is supposed to usher in an age of domestically driven consumption upgrade. On the other, an ever-expanding list of off-limit topics -- political, economic, social -- seems designed to empty out the minds of the middle class.

At the end of 2019 an article titled "China Will Soon Face an Era of All-around Weak Minds," by Zheng Yongnian, Director of East Asian Institute at National University of Singapore, resurfaced in wide circulation in China. The article attributes a weakening of intellect in China to knowledge creators being enslaved by money and power.

The article also invited questions about the government's growing encroachment on academic freedom and free speech. For instance, in public forums and even academic seminars organized by universities or research institutes, government officials and the country's richest take the central stage, while knowledge becomes a minor and optional decoration.

Suppressing the pursuit of knowledge and truth suppresses China's economy: China must empower its middle class politically and socially to unleash its full innovative potential. The government cannot dictate innovation because a creative society requires an education process that encourages open inquiries and vibrant debates.

The government cannot dictate innovation.   © Reuters

In addition, a free press and judicial independence are also necessary tools to protect private enterprise and individual property rights, which are integral to the middle class's confidence in investing in their future and in the society.

Overall, the government spends too much effort in policing people's thoughts and society in general then worries too much about political taboos. The recent Wuhan coronavirus outbreak essentially repeats the same mindset: instead of managing its discovery as a neutral public health issue, the local officials initially seemed to have focused on the political implications of information flow and their own careers.

Radio Free Asia estimates that China's national public security expenditure, also known as its stability maintenance budget, which includes maintaining formidable cyber operatives for propaganda and public opinion control, amounted to nearly 1.4 trillion yuan in 2019. This has nearly doubled in the past five years and surpasses China's 1.19 trillion yuan military expenditure.

These efforts divert government resources from more important economic tasks. China's growth will be better served by not treating the political and social aspirations of its rising middle class as a threat to the country's stability, but an asset to its future transformation.

Chiu-Ti Jansen is the founder of China Happenings multimedia platform and a TV and newspaper commentator on China's rise in the world.

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