New | Case of homeless Tianjin blast victim highlights the problem with China’s rising yet fragile middle class

Until a few months ago, Meng Fanjie considered herself among China’s rising middle class. A Tianjin-based white-collar professional, Meng earns more than 10,000 yuan (HK$12,000) a month, travels frequently for leisure and has some savings. Until August, she lived in a leased apartment into which she had poured over 100,000 yuan to transform it from bare concrete walls into a chic and cosy home. But things changed on August 12, when a series of explosions at a chemicals warehouse less than 1km from her home rocked the city, killing at least 165 people and damaging the homes of more than 17,000 households nearby, including Meng’s. Since then, Meng has been staying in a hotel as she waits for her landlord – who received the government compensation – to pay for her losses. “It’s a great loss to me, yet as the actual victim, I was ignored by the government. I’m homeless now,” she lamented. “Whatever they call me – office lady or middle class – I’m incapable of withstanding such disasters.” China’s middle class, with an estimated 109 million people, is now the world’s largest, according to a recent Credit Suisse report. It defined a Chinese middle class adult as one with wealth of at least US$28,000. “Chinese people’s spending power is growing. The middle class is expanding – and fast – but they are also facing very big risks,” said professor Yang Yansui of Tsinghua University. One major problem was that employees were subjected to high taxes and social insurances with low returns, she said. For instance, from the start of their careers, young people were required to contribute 8 per cent of their salaries into their pensions, compared with a tiered system in western countries. This meant that a worker’s money was being used by someone else while he was still far away from realising a return, Yang said. Another problem was the unequal distribution of education resources, which forced many young parents to splash out on things such as buying home near good schools in order to secure better access to education for their children. A third – and most important – problem was home purchase, which “held ransom many well educated young professionals with decent income”, Yang said. “Together, these factors make it difficult for the Chinese middle class to develop. Some may even fall outside the middle class because of these issues,” she said. Meng said she could have bought a home but chose not to as it was “not worthwhile” to buy one and live with mortgage. “In the United States, you buy a home and you own both the land and the things attached to it. But here, we own only the latter – and only for 70 years,” she said. As families in megacities such as Beijing and Shanghai struggle to afford their own property – with mortgage taking up more than half of the family income for many – people often joke that they are afraid to fall ill or meet with any accident as the expenses incurred would leave them high and dry. US citizens, on the other hand, were less worried about diseases and accidents because of better insurance schemes protecting them from such calamities, said professor Stephen Arbogast from the University of North Carolina at Chapel Hill. The US middle class was most anxious about the likelihood of losing their jobs, Arbogast said. “Companies move lots of jobs overseas. Employees in their 40s can become ‘obsolete’ in terms of skills or ‘over-qualified’ in the sense that companies no longer feel they should pay what they cost relative to someone slightly less skilled but much cheaper,” he said. “This job insecurity, which is often tied to the rise of globalisation, has weakened the bargaining power of employees and unions, leading to stagnant wages and incomes.” Shanghai University sociology professor Gu Jun believed it was too early to conclude that China’s middle class was rising. “I don’t think there are a lot of people [in China] who are living lives as decent as the American middle class,” Gu said. “Defining so many people as middle class [as in the Credit Suisse report] is like putting China’s feet into another country’s boots.” According to the Credit Suisse report, 39 per cent of the adult population in North America falls into the middle class, accounting for 21 per cent of the region’s wealth. In contrast, China’s middle class comprises 11 per cent of the region’s total adult population and holds 32 per cent of the region’s wealth. This means China’s middle class is in fact wealthier than most in the country as a smaller proportion of people are richer than them. Meng said she was more concerned about the compensation she deserved than about which class she belonged to in society. The compensation, which she estimated to be about 300,000 yuan, meant a large chunk of savings for her, she said. She and 60 other tenants in the same residential community had filed a suit against their landlords, who had refused to pay them for their losses, Meng said.

New | Case of homeless Tianjin blast victim highlights the problem with China’s rising yet fragile middle class

Many among China’s fast-growing middle class are in fact incapable of weathering disasters such as illnesses, accidents or retrenchment as their wealth is often tied up in housing