At present, China's real estate has entered the bubble stage, and the wealth of the Chinese people has also fluctuated sharply with the ups and downs of housing prices for more than 20 years. As the saying goes, "I saw him rise up a tall building, I saw him feast guests, and I saw his building collapse!"
Statistics show that there are now about 400 million middle-income people in China, and 900 million people are below the middle-income group. To achieve common prosperity, the focus is on increasing the income of the middle and low-income groups and improving the human capital of the low-income groups. ”
In the future, according to the country's development goals, China will promote the doubling of the middle-income group in the next 10-15 years, and the new 400 million middle-income groups are basically distributed in private small, medium and micro enterprises.
From the perspective of international experience, when a country's economic development level enters the middle-income stage, if the system is properly arranged, the size of the middle-income group can account for about 40% of the total population. In the high-income stage, it will increase to more than 60%, and basically form a social structure dominated by middle-income groups, that is, an olive-shaped structure.
In fact, the middle-income group is the main body of the "olive-shaped" social structure, the "stabilizer" of social harmony, an important guarantee for overcoming the "middle-income trap", and the backbone of achieving common prosperity.
However, as of now, the number of middle-income groups in China is still far from the goal of an "olive-shaped" social structure, which is also a major constraint to China's achievement of common prosperity. In the new era of high-quality economic development of China's economy, cultivating and expanding the middle-income group is not only the key to China's economy to resist risks and hedge downward pressure, but also the redistribution of social wealth with income distribution reform as the core will also be related to whether Chinese society can get out of the middle-income trap.
The "middle-income trap" refers to a state in which a country's per capita income reaches a middle level, but it cannot smoothly realize the transformation of its development mode, resulting in insufficient economic growth momentum and eventually long-term economic stagnation.
When a country develops to the middle-income stage, that is, after the per capita GDP reaches about 10,000-12,000 US dollars, there may be two outcomes: 1) sustained development and gradually become a developed country, 2. Falling into the middle-income trapSome developing countries will find themselves stuck in the middle of rising labor costs and declining cost competitiveness, unable to compete with advanced countries with high skills and innovation, or low-income and low-wage countries in cheap market manufactured goods, resulting in stagnant economic development. The latter result is known as falling into the middle-income trap.
The World Bank's concept of the "middle-income trap": The middle-income trap refers to the fact that few middle-income economies have succeeded in becoming high-income countries, which are often stuck in periods of stagnation in economic growth, unable to compete with low-income countries in terms of human costs and rich countries in the development of cutting-edge technologies. At present, typical representatives of middle-income countries include Brazil, Argentina, Kazakhstan, Malaysia, the Philippines, Mexico, Thailand, etc.
According to the central bank's survey data, more than 70% of China's middle-income household assets are real estate, financial assets account for only 30%, and the proportion of stocks, funds, insurance and pensions is low, and these types of assets together account for 8% of the total assets of residents. The average debt ratio of Chinese households is 57%, of which 77% have a mortgage, and housing loans account for 75% of the total debt.
As a direct consequence of the bursting of the housing bubble, falling housing prices have shrunk the wealth of large numbers of the middle class. Housing is the most valuable asset of the middle class. They generally use their savings to buy a house, even with a high mortgage. However, once the price of the house falls, the property of these people shrinks even less than their debt.
According to the 2023 Hurun Wealth Report, the Hurun Research Institute recently released data that as of January 1, 2023, the number of "wealthy families" with assets of 6 million yuan in China was 5.14 million, a decrease of 41,000 from the previous year, the number of "high-net-worth families" with assets of 10 million yuan was 2.08 million, a year-on-year decrease of 27,000, and the number of "ultra-high-net-worth families" with assets of 100 million yuan was 133,000, a decrease of 5,200.
The current round of real estate market adjustment in mainland China began in the second half of 2021, and after two consecutive years of decline, the national average house price has dropped by 23% compared with the peak, and the actual decline in some real estate projects in some areas is even greater. The middle class, which owns one or two properties in core cities, is the biggest victim of falling house prices.
Since 70% of Chinese households' assets are housing, this means that for every 10% drop in housing prices, the size of household wealth will shrink by hundreds of thousands of yuan to millions of yuan, resulting in a year-on-year decline in the number of "wealthy" and "high-net-worth" households in China.
The sharp drop in housing prices will have a greater negative impact on the lives and economic conditions of ordinary people. If housing prices continue to fall sharply, many people will become negative overnight, which will lead to a further widening of the gap between the rich and the poor in society and exacerbate social inequality.
The direct consequence of the shrinkage of residents' wealth is that the people have no money to spend, which leads to the downgrading of consumption, which hinders the internal circulation of China's economy and further increases the difficulty of stimulating domestic demand and economic recovery.
The disadvantages caused by the low proportion of middle-income groups to the economy and society are mainly reflected in the following aspects:
1. Restricting economic and social development
Facts have proven that if the proportion of middle-income groups is too low, it will be difficult for the state to provide people with better public services such as education, health care and pensions, and it will be difficult to meet people's needs for higher living standards and more consumption choices. If a country has been at the middle-income level for a long time, it will be difficult to get rid of its excessive dependence on traditional energy and resources, promote green development and low-carbon economy, and achieve economic transformation and industrial upgrading.
2. Restrict the release of consumption potential
In recent years, as the property market has entered the bubble squeeze stage, and the stock market has been in a bear market all year round, the middle-income group in the mainland has not increased with economic development, but has shown a decreasing trend. Many people's fortunes have been shrinking as house prices and stock prices continue to fall.
In this case, the living conditions of some middle-income groups are as described in an Internet joke, "After decades of hard work, they returned to the pre-liberation period overnight." "The decrease in the number of middle-income groups in the mainland has led to a decline in the overall consumption power of the society, which is the main reason for the current consumption downgrade.
Third, it leads to an imbalance in the social structure and the intensification of social contradictions
According to the law of "diminishing marginal propensity to consume", increasing the same amount of income, the increase in consumption of high-income and low-income people is different, so the structure of different income levels in society will bring different consumption tendencies, and then affect the total consumption of the whole society.
When income inequality widens, high-income earners increase their incomes but have a smaller marginal propensity to consume, and the increased consumption is limited. Low-income people have no spending power because their income is too low, which leads to weak consumption in the whole society. On the whole, the widening of income disparity has led to a downward trend in the average consumption of residents, which in turn has led to a decrease in the consumption level of the whole society. It can be seen from this that the phenomenon of consumption downgrade on the mainland is caused by the lack of consumption demand caused by the widening income gap.
Fourth, aggravate conflicts of interest
The middle-income group on the mainland has not expanded, but has been reduced, which is very unfavorable to economic and social development. It is reflected in the following aspects:
1. The gap between the rich and the poor destroys people's normal values
The poor believe that it is the responsibility of society to be poor, so they are full of hatred for society and develop hatred of the rich. As Confucius said, "Do not suffer from few, but suffer from inequality." With such a large disparity, capital gains (i.e., money begets money) far exceed labor, and no matter how hard they try, it is useless, so they no longer work hard.
The rich and middle class believe that we have achieved today's wealth by our own efforts, and society has given everyone equal opportunities, and the poor are poor because of your own lack of effort.
2. The solidification of social classes
At present, China's social class is becoming more and more solidified, which is reflected in the fact that the next generation of the rich is still the rich, the "second generation of the rich", while the descendants of the poor are still poor. Because the children of the rich are born with better material living conditions and more social resources such as medical care and education, as described by the same people, "they are born with a golden key in their mouths".
In the absence of social resources and family background, it is difficult for individuals to change their fate by their own struggle, so in today's social state, many people are basically doomed from the moment they are born. Therefore, many young people who have seen through the red dust no longer work hard, and simply choose to lie down.
3. Disrupting normal social order
Due to the solidification of social class, what kind of family a person is born in basically determines the fate of his life. A person's development and future depend on "fighting for his father," and where can any fair competition be embodied? The "three public principles" that a harmonious society should have openness, fairness, and justice cannot be realized.
Although the per capita GDP of the mainland has exceeded 10,000 US dollars, we should be soberly aware that China is still a developing country, and the biggest challenge facing China's high-quality economic development stage is to break through the middle-income trap and strive to enter the ranks of high-income countries as soon as possible. At present, the per capita GDP of developed countries in the world is basically above 20,000 US dollars.
If $20,000 is taken as the cut-off line for middle- and high-income incomes, how long will it take for the mainland to become a high-income country? According to the mainland's economic development target for the next 15 years, the average growth rate is between 5 and 6 percent, and if the growth rate is calculated at 5 percent, the mainland's per capita GDP is expected to exceed $20,000 around 2033.
In short, with the transformation of China's economic growth mode, consumption has become the main driving force for economic growth. In order to achieve this goal, it is necessary to solve the blockages and difficulties that restrict residents' consumption, and the adoption of various policies and measures to strive to raise the people's income level is the fundamental way to resolve this difficult problem.
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