China’s Middle Class Is Disappearing

An almost empty shopping mall in Changchun, Jilin province, China. (Photo credit should read ... [+] CFOTO/Future Publishing via Getty Images)

China once enjoyed an optimistic and confident middle class. It supported the economy’s growth path with sometimes exuberant spending and aggressive investing. Sadly, those millions are now losing ground, with many slipping back toward poverty.

This is no small problem for the Chinese Communist Party (CCP). It has long had an implicit contract with the Chinese people under which they will quietly tolerate the party in power and the party will deliver them prosperity. The authorities increasingly seem to be failing on their end of the bargain. So far, the public has taken a passive approach to the situation, cutting back on spending and trying, against the odds, to rebuild wealth. If things go to extremes, however, there is no telling how the Chinese people will react. There was after all considerable violence during the recession of 2009.

A primary cause of the problem, though by no means the only one, is the country’s ongoing property crisis. It has plagued Chinese economics and finance since 2021, when the giant residential real estate developer, Evergrande, announced that it could no longer discharge its financial obligations. The financial strains brought by this failure and several more that have followed in the years since have depressed the pace of home building and home buying. Most important for the middle class is how these matters have depressed the value of existing homes and hence a major source of household wealth, especially the middle class. Last December, for instance, the average price for an existing home in 70 medium and large Chinese cities fell 6.3 percent from the year before, the steepest drop since the start of this data series in 2011.

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