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China’s 'miracle economy' is faltering. Growth is sliding, markets are plunging. Some warn of a real-estate bubble about to burst. GlobalPost brings you the latest from the struggling Pearl River Delta, where much of the world’s merchandise is manufactured.

China middle class car BMW
Not long ago, China's middle class struggled to buy bicycles. With wages rising rapidly, BMWs are now within reach. (Philippe Lopez/AFP/Getty Images)
China

Average Chinese are awash in consumer bliss

Despite China’s economic woes, its emerging middle class remains elated by progress.

Editor’s note: China’s “miracle economy” is faltering. In this multi-part series, GlobalPost brings you the latest from the struggling Pearl River Delta, where much of the world’s merchandise is manufactured.
 
SHENZHEN, China — Wearing pink striped seersucker shorts, an Abercrombie polo, and a polished metal-clasp watch, Summer, 33, could have easily passed for an upper middle-class American. We talked about his mortgage, his Honda, his Bible study. Listening to him, I almost felt like I was chatting with some upstanding friend from New Jersey — except, of course, he was speaking Mandarin Chinese.

I met Summer in Shenzhen, where he lives. As a financial journalist and a proud white-collar professional, he seemed an ideal person to describe the hopes, expectations, and fears of China’s middle class.

“My personal experience shows the change in China has been incredibly quick,” he said. “My generation is the first real middle class. My friends and I have good education, stable jobs, and our income has increased.”

Married, with a young son, Summer considers himself lucky — but hardly exceptional. He grew up in a small village, where his father was as a medicine distributor. His mother worked as an accountant.

He has experienced China’s development personally, in a tangible way.

“When I was young, I remember a bicycle was a very valuable thing for a family to have,” he recalled. “Then when I was a little older, I found I could easily buy a bicycle. In college, I thought it would be cool to buy a car. Then two years after graduation, I thought it was easy to buy a car, but it would be nice to get a good car, a BMW. Now I could buy a BMW, but I prefer a Honda.”

And it’s not just him. When Summer goes back to visit his village, he said, all his friends also have cars — even though the village is only a few blocks long.

Summer does, however, consider himself exceptional for having bought a house in Shenzhen when it was still affordable to do so. When he took out a mortgage in 2004, the price for a flat was around 4,000 to 5,000 yuan, or $650 to $800, per square meter. Now it’s risen six-fold: at least 30,000 yuan per square meter in the area where Summer lives.

 “When I bought, everyone said ‘don’t buy, the market will fall,’” he laughed. “The gap between first-time buyers now and long term owners is huge. The rising market has been good for me. People who bought first benefit the most.”

Despite benefiting from the surge in real estate prices, Summer worries about the inequality it has produced.

The solution, he believes, is not for the government to try to pop the bubble, but to build more public dwellings, as in Hong Kong. Nearly half of Hong Kong’s population lives in subsidized homes.

The other key to reducing inequality, he said, is reforming China's residential registration system, or hukou. Under this system, people who lack the right hukou are shut out from public benefits such as education, welfare, and housing.

“With housing it’s like you still need a meal ticket,” Summer said. “If you don’t have a hukou, you can’t buy a house... If China is to be balanced and harmonious, there should be more people like me — fewer rich, fewer poor."

It seems that Beijing may agree. Li Keqiang, China’s premier, has said that increased urbanization — and perhaps hukou reform — is needed to address China's huge income divide between cities and the countryside.

“This must be the urgent focus for the government, the hukou reform,” Summer said. “Optimists say, ‘There are still 800 million peasants. The next economic miracle will be by these people.’”

 Of course, it's not just another economic miracle that middle-class Chinese like Summer are hoping for. As China shifts to a more urban, prosperous society, he said, political transformation is bound to happen.

“Give it 20 years and China will have a huge change,” he said. “We all watch Hollywood movies, we have the same views as Americans. When we enter the government there will be big changes.” 

http://www.globalpost.com/dispatch/news/regions/asia-pacific/china/130703/awash-consumer-bliss