The World Bank estimates that the global middle class is likely to grow from 430 million in 2000 to 1.15 billion in 2030. The bank defines the middle class as earners making between $10 and $20 a day — adjusted for local prices — which is roughly the range of average incomes between Brazil ($10) and Italy ($20). In 2000, developing countries were home to 56% of the global middle class, but by 2030 that figure is expected to reach 93%. China and India alone will account for two-thirds of the expansion, with China contributing 52% of the increase and India 12%. The expectation is of the nearly 700 million new middle class by 2030 that nearly 350 million will be from China. This figure could be an underestimate based on stronger GDP growth in China.
Middle classes and affluent classes are needed for robust domestic consumer markets. Economic growth that is dependent on exports are in trouble of the export markets falter. Also, in order to grow the world middle class to 1.15 billion means that just selling to the existing 400-500 million middle class will not be enough. It is also important to understand the emergence of a global middle class to understand the structure of the future and of new market opportunities.
The forecasted emergence of China’s middle class from a 2006 McKinsey projection. The McKinsey projection is based on conservation assumptions of 6.5% GDP growth for China, which has been averaging 10.5-11% GDP growth since 2006. This site forecasts a bit over 9% growth for China from now to 2015. This would put the overall GDP and per capita GDP 30% higher than McKinsey to 2015.
Lower middle class (25K yuan-40K yuan per year in household income). This is about US$4k-6K based on current exchange rates.
McKinsey projection
2009 73 million households (32%) out of 220 million
2011 96 million households (40%) out of 240 million
2015 140 million households (50%) out of 280 million
McKinsey + 30% GDP to 2015
2009 85 million households (37%) out of 220 million [+9% GDP]
2011 125 million households (52%) out of 240 million [+16% GDP]
2015 140 million households (50%) out of 280 million [+30% GDP, more richer]
The upper middle class (40K yuan-100K yuan per year in household income)
This is currently about US$6K-15K (6.8 yuan to 1 US dollar).
If the yuan moves to 3 to 1 USD by 2015. Then the McKinsey upper middle class definition is US$13,000-33,000.
2009 24 million households (11%) out of 220 million
2011 29 million households (12%) out of 240 million
2013 39 million households(15%) out of 260 million
2015 59 million households (21.2%) out of 280 million
Adjusted McKinsey Projections
2009 27 million households (12%) out of 220 million [+9% GDP]
2011 40 million households (17%) out of 240 million [+16% GDP]
2013 65 million households (25%) out of 260 million [+23% GDP]
2015 80 million households (29%) out of 280 million [+30% GDP]
For the 100+k yuan (US$15,000+), in 2015, they will be 6% or about 28 million households. In 2025, they are projected to be about 11% or about 40 million households.
Adjusted projections: 9% in 2015 and 20% in 2025.
Other sources estimating China’s Middle class
Euromonitor indicates 80 million in 2007 with 60,000 yuan to 500,000 yuan.
It is forecast to expand to 700 million by 2020, driven by continued strong economic growth.
Gary shilling, Insight wrote in Forbes
China’s middle and upper classes amount to about 110 million. This indicates that only 8% of the total 1.4 billion population are middle class in terms of having measurable discretionary purchasing power.
Wikinvest looks at the rise of China’s Middle Class There is analysis of rising consumer spending in electronics, cars, insurance and other markets.
Present estimates of “middle class” in China range from 100 million to 247 million, depending on how much income renders one “middle class.” Assuming that an income of about$9000 is necessary to be considered middle class, China could have over 600 million middle class citizens by 2015. The China State Information Center, by contrast, considers those earning 50,000 yuan ($6,227) per year to be middle class – and expects 25% of the populace to qualify by 2010.
Estimates of the size and growth rate of China’s middle class vary. Roughly half of China’s projected urban population will be middle class in 2025. Unlike the United States, where income typically peaks between the ages of 45 to 54, it is predicted that the wealthiest consumers in China will be between 25 to 44 years old because the younger generation will be more highly educated.
The meteoric rise in China’s middle class is tied to dramatic increases in its per capita income, which is growing at a nearly unprecedented rate. The first industrial revolution created a 250% increase in per capita income over a 100 year period. The second industrial revolution triggered 350% per capita income growth over 60 years. By comparison, China is on track to create a 700% growth in per capita income in just 20 years.
Chinese households currently save 25% of their post-tax income, according to the China Statistical Yearbook. A survey by McKinsey indicated that this high savings rate was driven, in part, by Chinese citizens’ belief that they need to set aside funds for retirement and healthcare expenses. If these expenses do not rise as rapidly as income levels, then Chinese consumers may have a surplus of funds that they are willing to spend. And, if health care costs do rise, the Chinese healthcare sector may be an attractive investment.
Mckinsey Quarterly looks at the value of China’s emerging middle class
– Growth translates into rising incomes.
– Rising incomes will create a large urban middle class.
– The largest category of spending in China is food.
– Spending on categories other than food will increase faster.
This is likely an underestimate. Some assumptions of the McKinsey projection:
– urban Chinese consumers, rising from 42 percent of the total population today to more than 60 percent by 2025.
– assumed average growth of 6.5 percent in per capita GDP from 2005 to 2025 (a midrange forecast), with higher annual growth initially but slowing after 2015.
This site believes that China’s urbanization has been underestimated and will reach 75-80% by 2020.
This site also projects that China’s economic growth will be stronger. Estimating about 9% GDP growth until 2015 and then an average of 7% GDP growth from 2016-2025. This means and accumulation of 30% more GDP performance up to 2015 over the McKinsey assumptions and another 30% from 2015-2025. The currency projection of this site would mean stronger per capita income when converted to US dollars for comparing the United States and China.
Year GDP(yuan) GDP growth Yuan per USD China GDP China+HK/Ma US GDP 2007 24.66 11.9% 7.3 3.38 3.7 13.8 Jun08 26.0 6.88 3.78 4.2 Past Germany Oct08 26.7 6.65 4.0 4.45 2008 27.3 10.2% 6.35 4.3 4.8 14.0 2009 30.1 9.8% 5.62 5.4 5.9 14.2 Pass Japan 2010 33.7 9.5% 5.11 6.6 7.1 14.6 2011 37.0 9.5% 4.64 8.0 8.5 15.0 2012 40.6 9.5% 4.26 9.5 10.0 15.4 2013 44.2 9.0% 3.91 11.3 11.8 15.9 2014 48.2 9.0% 3.72 13.0 13.5 16.4 2015 52.0 8.0% 3.54 14.7 15.2 16.9 2016 56.2 8.0% 3.53 16.7 17.2 17.4 Passing USA 2017 60.4 7.5% 3.38 18.8 19.4 17.9 Past USA 2018 64.2 7.0% 3.20 20.9 21.5 18.4 2019 69.2 7.0% 3.09 23.0 23.6 19.0 2020 74.0 7.0% 3.0 25.2 25.8 19.6 2021 78.4 6.0% 2.9 27.2 27.8 20.2 2022 83.1 6.0% 2.9 29.4 30.0 20.8 2023 87.3 5.0% 2.8 31.5 32.2 21.4 2024 91.7 5.0% 2.8 33.7 34.4 22.0 2025 96.3 5.0% 2.7 36.1 36.8 22.7 2026 101.1 5.0% 2.6 38.7 39.4 23.4 2027 106.1 5.0% 2.6 41.4 42.1 24.1 2028 111.4 5.0% 2.5 44.4 45.1 24.8 2029 117.0 5.0% 2.5 47.5 48.2 25.5 2030 122.8 5.0% 2.4 50.9 51.6 26.3 Close to double USA
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Brian Wang is a Futurist Thought Leader and a popular Science blogger with 1 million readers per month. His blog Nextbigfuture.com is ranked #1 Science News Blog. It covers many disruptive technology and trends including Space, Robotics, Artificial Intelligence, Medicine, Anti-aging Biotechnology, and Nanotechnology.
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