Polarization, the fall of the middle class

This is the characteristic of the times, and it is also the biggest economic and even social feature of the future.

Polarization means that on the one hand, consumption upgrades, and on the other hand, consumption downgrades, which symbolizes the future macroeconomic trend, and also means that the three types of people in the traditional market economy are being reshaped.

They are wealthy, middle-class, and low-income groups.

Today, these three groups are showing a greater differentiation, with the slowdown in macroeconomic growth being more vividly reflected in this moment, and the wealthy group is often more resilient in the face of slowing economic growth due to better cash flow and asset allocation.

In turn, the middle class peaked in 2019, with the number of people earning more than 5,000 per month in mainland China exceeding 70 million that year, which was seen by some business platform companies as an excellent trend for consumption upgrading, but the situation took a sharp turn for the worse in the following years, and the intertwined risks and uncertainties of external and internal exacerbated the deterioration of the mainland's consumption environment.

The wealthy group has become conservative, and the middle class group is facing greater risks, and the decline in income and real estate asset prices have further lowered people's consumption expectations, and with it, the recession of macro consumption has led to more employment difficulties, and finally the low-income group bears the biggest consequences of the entire macroeconomic cycle.

As a result, polarization and the fall of the middle class have become the fruit of today, but not the cause of today.

In fact, as early as 2018, consumption upgrades and downgrades have been happening simultaneously, which is not a phenomenon that has only appeared in recent years, but has long been traced.

2018 may be an important turning point for understanding China's economy.

That year, the trade friction launched by Trump began to take shape, changes in the external environment began to appear, and the import and export trade also began to show a trend in that year.

As a direct result of this, incomes have declined, consumption has decreased, and ordinary people feel that it is more difficult to earn money.

In 2018, Fuling's mustard revenue and profits rose together, and instant noodle sales revenue stopped falling and rebounded for the first time in five years, which were seen as examples of consumption downgrade in that year.

What's more, the unbranded sanitary napkins exploded on an e-commerce platform that year, and it also ripped off the fig leaf that the general income of mainland residents is still low.

Conversely, a small number of wealthy groups still have great spending power.

That year, the Toyota commercial car Alpha, priced at about 800,000 yuan, needed to increase the price by 30-400,000 yuan to pick up the car, and on weekday evenings, the luxury stores on the ground floor of the Lujiazui IFC were still crowded with customers queuing up to enter.

Polarization, which has evolved from 2018 to today, has become an increasingly important symbol and even a meaning, deeply rooted in the hearts of the people.

Consumption is not only how much one person contributes to GDP, but also the driving force of the entire business society; one person's consumption is another person's income, and the so-called economic growth is actually the sum of trillions of transactions.

Now, further divergence in income has led to a serious downgrade in consumption.

What is polarization?

According to the data of CICC in 2019, there are only 700,000 people in the mainland with a monthly income of more than 20,000 yuan, and they are a proper wealthy group, and as of today, the number of people with a monthly income of more than 10,000 yuan is still only a little more than 8 million in the mainland, which is very different from the huge base of 1.4 billion people.

There is no doubt about the authenticity of this data, a few days ago Bai Yansong said that there are 400 million people in the mainland who have entered the "middle-income group", according to the data in the figure above, that is, there are 400 million people in the mainland with a monthly income of more than 3,000, and these 400 million people are a proper middle-income group.

What is Polarization?

If we look at it by the standard of middle class and affluence, there are more than 8 million people in the mainland with a monthly income of more than 10,000 yuan, and these more than 8 million people can be said to be a wealthy group, and the population base of horizontal comparison is 1.4 billion.

The middle-class group in the mainland refers to the monthly income of more than 5,000 yuan, and the population is about 70 million, which is the middle-class group.

And how many people have a monthly income of less than 5,000 yuan?

The answer is 1.3 billion people.

What is the concept of 1.3 billion people? Even if these 1.3 billion people are excluded separately, it is still the second most populous country in the world.

This means that as of today, there are still 1.3 billion people on the mainland who earn less than $700 a month.

In the long run, economic growth of an economy is nothing more than someone spending more money instead of saving more money, but in the face of iron-clad income data, we have to admit that there is still tremendous pressure on the mainland's residents to distribute income, and this pressure was not prominent in the past when the economy grew rapidly.

But when economic growth slows, the problem is exposed, and more people have low incomes, and when macroeconomic confidence is lost, people become more conservative than ever to be optimistic about consumption.

According to the data of the Bureau of Statistics, the national consumer price index (CPI) in December last year fell by 0.3% year-on-year, and the producer price index (PPI) of industrial producers also fell by 2.7% year-on-year.

Why are there deflationary pressures?

Polarization and the fall of the middle class may be the reason, but it is obviously not the source.

One of the priorities for the future is to improve the income distribution of low-income groups and expand the middle class.

The reason is actually very simple, even if the wealthy group has money, their spending power is limited, no matter how rich a person is, he can only drink two bottles of red wine a day, eat four meals at most, and he can't consume a little more.

The logic of economic growth in a society is not to make a few people richer and richer, but to ensure that the majority of people are getting richer and richer, and a healthy and sustainable society must be an olive-shaped society, not a pyramid type, which is the different economic resistance caused by different income models.

In the final analysis, our vulnerability lies in this, relying heavily on personal income and lacking a relatively sound social security system, which leads to the fact that once the macroeconomic needs are under pressure, 1.3 billion people have a monthly income of less than 5,000, and they have almost no ability to bear the pressure.

From a macro point of view, from 1980 to 2010, these 30 years is the honeymoon period between China and the United States, and it is also the take-off period of the mainland's rapid economic growth, in these 30 years, the mainland's economic growth is at a high level of 10% every year, so 30 years, it stands to reason that a huge amount of wealth should be created, but in fact, the mainland still has a large number of low-income groups, even with a monthly income of more than 3000, can become a middle-income group, what is the reason?

It is possible to reflect on the fact that the economic benefits created in these three decades have fallen into the redundancy.

Economist Chen Zhiwu once said that if the national economy of any economy grows at an average rate of more than 10 percent for 30 years, the amount of wealth created is enough to enable all people to live a prosperous life.

But it is clear to us that the tremendous wealth created in the past 30 years does not seem to be in the private sector.

Where the economic benefits go, this is a question in itself.

In the past, when we talked about dividends, we talked about demographic dividends and market dividends, but in essence, the ultimate dividend of the economy must be the dividend of consumption and the dividend of hiding wealth from the people.

The rapid economic growth of the past few decades has indeed brought the demographic dividend and market dividend into full play, but due to the lack of consumption dividend, at this moment, with the further consumption of the demographic dividend and market dividend, if consumption cannot feed back to the market, then long-term economic growth will have the possibility of being cut off.

Relying on investment and infrastructure, relying on selling houses can indeed pull the economy to rebound in the short term, and even bring about rapid economic growth, but in the past we have gone almost these two roads, selling houses consumed the wealth saved by the post-70s and post-80s for many years, and infrastructure has also driven the continuous saturation of the infrastructure market around the country, and there is not much room for these two roads to continue to go.

In the future, if personal consumption cannot drive the macroeconomic growth market, then the expectation of uncertainty may continue.

Therefore, the next focus is actually how to optimize and improve the mechanism of income distribution, give back the dividends of the market and the population to individuals and ordinary people, further optimize the surplus and transaction costs in transactions, shorten and reduce administrative costs, reduce costs and increase efficiency as much as possible, and give dividends back to the private sector rather than others.

I think this is the key point that will determine whether the trend of polarization and the fall of the middle class will continue or end.

Needless to say, there is no need to say much about the resistance, but in ancient times, there was a feather bone to heal, and now there is a market economy, and the resistance is overcome, and the premise is that we must focus on the advantages after overcoming the resistance, rather than just seeing the difficulties of the resistance.

Confidence is not only in the mouth of the word confidence, the more important embodiment of confidence is how many assets in the pocket, how much money in the wallet, this is not only a person's greatest confidence, but also his confidence when making decisions.

Once there is no money in the pocket and the wallet is empty, there is no way to talk about consumer confidence and entrepreneurs' investment and expansion.

end.

Author: Luo sir, the workplace reference of the new youth. Concerned about the logic behind the development of things, optimistic pessimists. Follow me and grind the knowledge to you.