Came across a really interesting article basically telling me that there's really no such thing as a new emerging middle class in China. Say what? I'm one of those that has always bought into the assumption of a growing middle class in China. Afterall, it was the basis for my existence as head of marketing for China's largest TV shopping company during the 5 years I was working in Shanghai. My job depended on the existence of a middle class in China and we had accumulated over 700,000+ of them in our customer database in a matter of years.

As the article mentions:

The assumption of middle- class behaviour, especially in patterns of consumption, "is to be expected as a function of globalised commercialism," with Gucci, Loewe and Louis Vuitton brands targeted at the wealthy consumer in Shanghai and Beijing, as well as in Milan and New York.

But Goodman insists China's "new rich categories of entrepreneurs are less the new middle class than a future central part of the ruling class". They are quite unlike the 19th-century European bourgeoisie in the extent to which they have emerged from and retain close relationships with the established political system.

Once again, I've come across a very highly academic China theory that I'm struggling to understand in real life terms. Reminds me of being back on a panel of speakers a few months ago at a business ethics conference in Beijing. Everyone's theory made sense...in theory. When it came my turn to address the audience, it was a bit intimidating because I had no theory to offer. So I gave an opinion based on experience instead. Seemed to work just fine in getting my points across and understood. I try to do the same for this blog. See, I'm a simple person. Concepts and theories are lost on me unless I can grasp them through real life examples.

So with that, one of the first things I did was turn to the trusted opinions of others by sharing the article with my valuable network of China business friends on Facebook. The following are some interesting insights:

Gregor Kaelin, Investment Advisor and Executive Director of Swiss Asset Management International comments:

I agree with the author but I also have to disagree. I agree that the entrepreneurs he is talking about are not the future middle class but will be the upper class. They are only where they are because they have very good connections to government bodies and people. Therefore one cannot expect these people to have any interest atall for change in the system as they are the prime profiteers of it. Nevertheless there is a significant middle class on the way which has gone to university and has well-paid jobs in the private sector. Many on them will never become rich but will form the well-off middle class of future China. They will have a car or two, maybe an apartment, will go on holiday once or twice a year but will hardly ever own millions and have no political influence whatsoever, probably no political interests either. There will, however be a very large portion of the population who will not profit from economic development and will remain very poor.

 

Jianjun Zhang, Founder and Owner of Yeasir.com follows up with:

Hi Gregor, I agree with what you have said above. And would like to add my two cents: those entrepreneurs who run state-owned businesses are assigned the position by the party and the government. They don't need to have capital or even talent but they must be loyal to the party. Actually this is a legacy system. The real private sector entrepreneurs are the real hope in the future.

 

Peter He, Global Digital Strategy for MTV Networks says:

i never really liked analogies about china with a lens. middle glass was created by western economists, to measure purchasing power, to project future growth, to certain extent. so sizing china's economic growth pattern with such lens will inevitably fall in to a trap. because even in the most developed economy, middle class is disappearing. how do you explain this? in other words, there is no such a thing as middle class. china's economy and growth has to tie in with government. he is right that china's model is somewhat closer to earlier japan's. and there are reasons for that.

wealth accumulation is a process. given the size of china, 30-years is not enough. it takes a few generations. but china is getting there, with its own style and pace.

 

Fond Tuinstra, Founder of ChinaBiz Speakers

The concept of the "middle class" is a rather complicated one, with historical, sociological and economic dimensions. In relation to China the unproven assumption is that we all more or less agree on what the "middle class" is, wrongly I believe, adding greatly to the murky discussion on the position of that middle class. At least Goodman defines his look at the middle class and by doing that you see it is almost impossible to transfer that concept to China.
From a sociological perspective, being middle class has become a rather successful concept in the US, where even the poor and the rich believe they are middle class. Europe has been copying that, be it not always very wholehearted, to a certain degree.
Most people I know in China do not aspire to be middle class, unless they have been living in the US for a long while. Chinese want to be rich, very rich, even though that is not achievable for most of them. Being middle class refers to a US way of thinking

Janet Carmosky, CEO, The China Business Network adds her 2 cents:

Having read the write-up in The Australian, I'm intrigued enough to read the book.

I'm not sure Goodman's saying that Chinese don't shop, or that the numbers of Chinese who do shop (and the means by which they achieved the power to shop) aren't growing and aren't based on an increasingly broad economic and social structure.

Pehaps his argument is that the Chinese who shop the most are more likely to 1. have benefited from government relations, and 2. aspire to political power than westerners generally assume.
Americans tend to believe in a simple model: that any nation reaching towards greater productivity will in the process become more "like us". The dynamic between culture, society and economy is more complex than that, and if anything, culture drives economy, not the other way around.

 

Paul Denlinger of The China Vortex:

Many of the early entrepreneurs made their money through government connections; when they saw an opportunity to make money by starting their own company, they made the move to the private sector where they could keep all the profits for themselves. Others made their money essentially by "asset-stripping" or stealing state-owned assets.

Those early days of asset-stripping are over; now there is a new generation who have their own ideas and see their own opportunities. They do not rely on any state connections.

This is the next wave of Chinese entrepreneurialism and capitalism. For commodity services products (oil, coal, electricity, transport, etc.) the government and party will continue to play a dominant role. As for the rest, it will be mostly private sector. This private sector will employ the members of the rising middle class.

So I would say that that the author's views are out of date; there is a new and rising middle class which does not depend on the government now.

 

Me personally? I still don't think I understand the whole argument the author is making and still have a lot of questions. For starters, I would really like to understand David Goodman's definition of middle class first. Maybe then I would have a better understanding of where he's coming from. Maybe I'm just missing something. Maybe I need to read the book (maybe that's the point of the confusing article. aha. kaching)

Just based on the article alone, it sounds to me like Goodman may be referring more to the "nuevo riche" of China - not the middle class. But I'm going by the assumption from the article's headline:

"Myth Of China's New Middle Class"

Yes, I'll agree that the new rich category of entrepreneurs are less the new middle class than the future ruling class. Isn't that stating the obvious? Who out there is arguing otherwise? There's nothing to argue in that argument. What's new here? I don't get it. What of the educated white collar Chinese who have a monthly household income of RMB 5,000 - RMB 15,000 range and pack the Ikea, Carrefoure, Parkson and XuJiaHui stores on the weekends? I spent years marketing to them. I studied them. I sold to them. They never struck me as being in a transition period towards becoming China's next political elite. They are educated, climbing the corporate and social ladder, accepting that they may never become millionaires and content with not being involved in politics. If they do not define the middle class as we westerners know them to be, then what are they? Hmmm...as mentioned, I think I'm missing something here. Alas, I believe a few clicks at Amazon.com will shed some light on this for me.

While I collect a few more thoughts on this...couldn't help but think of a few lines from one of my favorite movies:

Ever see that movie Sixth Sense? There's a famous part of the movie that goes something like this:

"I see dead people."
"In your dreams?"
*Cole shakes his head no*
"While you're awake?"
*Cole nods*
"Dead people like, in graves? In coffins?"
"Walking around like regular people. They don't see each other. They only see what they want to see. They don't know they're dead."
"How often do you see them?"
"All the time."

Well, if someone out there is trying to tell me there is no such thing as a middle class in China, my version of Sixth Sense as it would apply to the article I just read would go something like this:

"I see middle class people"
"In your dreams?"
*Christine shakes her head no*
"While you're awake?"
*Christine nods*
"Middle class people like, in department stores, restaurants and office buildings in China spending their disposable income and not caring about whether or not they become China's next political leaders?"
"How often do you see them?"
"All the time."

Thanks to Rick Martin (twitter: pandapassport) for sharing an insightful post:

Ben Ross on Western Media Bias

I like referring to blog posts of people who are able to write stuff out in a well thought out piece. Unlike me. If you asked me about my thoughts on western media bias towards China, it would look something like this:

Warning. The following is 0% new information and 100% rant.

No seriously, let me point out something interesting about western media in China. It's not top secret. All the major news outlets have a local presence of some kind in China. A rep office, a bureau, freelance writers, etc.

Well, I was talking off record with the Beijing bureau of one of the 3 letter networks (how vague I am) -- who had approached me last year for introductions to a few people I had previously interviewed on The China Business Show. We got to talking and I candidly voiced my frustration about having to deal with 6 months worth of different variations of the same lead paint toy headline. She voiced the same frustration and said that HQ just doesn't listen to them. It appears there's definitely a big disconnect between the kinds of stories they would *like* to cover...and the kinds of stories that actually get covered when it comes to China.

Ok, sorry. I'm not a journalist nor am I a rocket scientist but it would appear we've got a downward spiral of sorts that's contributing to the dumbing down of America by western media. Follow me here. On one hand, you've got news networks who earn their money by selling ad slots. Therefore it's in their best interest to play to as large an American audience as possible. So they end up presenting news that they *think* the American public wants to hear.

Then you've got the American public. Who really want to consider themselves well informed. Afterall, we live in a free country. Everything we see on the news must therefore arrive to our made in China flatscreen TVs as "fair and balanced" already wouldn't you agree? So they tune into the news and channel after channel feeds them with the same type of China headlines that they figure the China they're presented with must be the whole picture.

Then one day the American hops on a plane and visits, studies, works in China for the first time and realizes that propoganda swings both ways.

UPDATE

While we await for people to set up their webcams and grab their Seesmic invite codes for video replies, there's a debate and discussion going on in the comments section of my post on whether western media is misinformed about China.

Some interesting insight and opinions that I'm going to gather up, summarize and post about next week on The China Business Network along with the video replies.

Please feel free to add your 2 cents for the record...

Shanghaiist posted this recent clip from Laura Ling of Current TV covering China's booming sex industry. Really sad reality about China that you don't often hear about...but something I used to see all the time while living there. Seriously, you just came to accept these hair salons with the frosted glass doors as part of the landscape of the city. What concerns me is many of these girls are uneducated from poor provinces and expose themselves and others to the realities of HIV and STDs.

By now, many people have heard about a man in China who was beaten to death after he was caught filming a clash between the local city management officers aka "Chengguan" and citizens protesting an urban trash dump encroaching into their residential area.

Whenever I hear about China news of this nature hitting the Google News headlines and written up in CNN Headlines as "China blogger beaten to death" the first thing I do is turn to the inside sources of China news and commentary I trust. Either Global Voices Online, China Herald or Danwei.org

I learned a long time ago, that I can't trust CNN headlines. They're there to catch world attention, not to necessarily provide in depth coverage of a story. Afterall, this is the same company that inserts "scary intro music" along with threatening titles such as RED STORM RISING when it comes to covering segments on China courtesy of Chinaphobic Lou Dobbs. You would think from the headlines and the way people repost and blog about it afterwards that this was about the Chinese government cracking down on bloggers in China.

For starters, can anyone confirm this man was a blogger? There is something emotional about the word blogger amongst the blogger community. I appreciate it. I get it. But there is nowhere in credible news sources that this man was a blogger. No link to a blog of his. It appears he was an unfortunate man with a cell phone camera who didn't realize the Chengguan would turn on him in the way they did. I mention this because had the title of the news story reflected what actually took place

"Man Beaten To Death By Corrupt Local City Management Officers For Taping Clash With Citizens Over A Trash Dump"

...I highly doubt that it would've gotten the attention of widely read tech blogs such as TechCrunch

But insert the word "blogger" in there, and it makes a huge difference as to who pays attention. It also leads to the story being debated in the wrong context. Before you know it, I'm reading about suggestions by TechCrunch readers for an international boycott by bloggers of the Beijing Olympics over this incident.

Anyone care to read between the mainstream media headlines? According to John Kennedy's post on Global Voices Online, the incident is less to do with the Chinese government cracking down on Chinese bloggers and more to do with the growing outrage over the corruption of local government employees who often abuse what little power they are given.

It’s important to note that the Chengguan in China who often abuse their local power are often no more than a bunch of uneducated thugs who overstep the boundaries of what little power is given to them at the municipal level. The beating of this man was not sanctioned by the Chinese government. It appears it was an attempt by these local “municipal authorities” to ensure they weren’t exposed for their corrupt ways. In fact, I would bet that the 4 guys that were arrested are headed for some serious punishment - especially since this incident made it to the international press and caused another loss of face for the Chinese government.

I just want to point out that what is often portrayed by generic coverage by CNN and reposted on blogs like TechCrunch often reflect a shallow level of understanding that instantaneously translates in our RSS readers as “evil Chinese government cracks down on bloggers in China” — without a better understanding of what sparked the situation to begin with and what the outrage in China internet is about. The Chenguan did not beat this man to death because he was a blogger. They were trying to keep from getting in trouble themselves for having their actions taped and exposed by a passerby.

This issue is more about growing outrage of citizens in China over the corruption in the country by local officials than it is about bloggers getting singled out and silenced by the Chinese government.

True, whether or not this man was a blogger doesn't take away from the fact that an innocent man was killed over trying to capture something unjust that he was witnessing. Just wanted to get the facts straight as there is much more to the story than censorship of bloggers in China. The bigger issue at hand is rampant corruption at the local government levels that threaten stability in China as citizens grow tired of having to put up with it.

Ok, so it's been a few days since I sent out my bunch of invite codes to Seesmic and not a single person has gotten on yet to give it a try. Maybe because it's a bit hard to understand since it's still in its "pre-Alpha" testing stage. I've been on 3 days and while they are still in the process of building out more functionalities for it, it's very obvious that this is going to probably replace a lot of the ways we communicate once people get the hang of it and give it a try. KEY WORDS = Give It A Try.

So I came up with an idea and got the help of the community to show you all an example of what Seesmic is. (Founder Loic Le Meur actually asked this question yesterday and I look forward to the Seesmix they'll be making of it) ...but in the meantime, to me Seesmic's a platform for having conversations with people around the world -- either (almost) realtime or when convenient. A cross between Twitter and Youtube I've heard.

To show you guys how a typical conversation evolves I asked the community the following question:

...and within minutes I received some really interesting "right off the top of my head and into the Seesmic stream" replies. Here are some I'd like to share with you: