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The rise of middle class in rural China

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  • Zhang Yuan
  • Guanghua Wan
  • Niny Khor

Abstract

Purpose – Using official and household survey data, the purpose of this paper is to analyze the size of middle class in rural China, its trend and geographical distribution. Determinants or drivers of changes in the size of middle class are explored. Design/methodology/approach – An absolute definition of middle class, adjusted by rural purchasing power parity (PPP) and spatial price index, is employed to measure the size and geographic distribution of rural middle class in 1988, 1995, 2002, and 2007. Biprobit models and OLS models are estimated to investigate the determinants and consumption behavior of middle class in rural China. Findings – Major findings include: in 2007, as many as 398 million rural residents or almost 54 percent of China's rural population belonged to the middle class; the size estimate of China's rural middle class based on income is broadly consistent with that based on assets; factors enhancing the probability of a household entering the middle class include human capital, political capital and non-farming employment while industrialization, urbanization and development of TVEs also play significant roles; and the middle class not only consume more, but also consume more durables. Research limitations/implications – A limitation of the paper is the use of 2002 data. However, more recent data are not available. Originality/value – The size of the middle-class is crucial for the stability of China, and the growth of the middle class in rural China is crucial for rebalancing the Chinese and global economy. Thus, the measurement results, the identified drivers, and the consumption behavior of rural middle class revealed in this paper can help shed light on nurturing middle class and adjusting development strategy for China to achieve a more sustainable and balanced economic growth.

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Bibliographic Info

Article provided by Emerald Group Publishing in its journal China Agricultural Economic Review.

Volume (Year): 4 (2012)
Issue (Month): 1 (February)
Pages: 36-51

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Handle: RePEc:eme:caerpp:v:4:y:2012:i:1:p:36-51

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Related research

Keywords: China; Consumption; Development strategy; Income distribution; Middle class; Rural areas; Rural China; Urbanization; Wealth and income;

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References

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  1. Birdsall, N. & Graham, C. & Pettinato, S., 2000. "Stuck in the Tunnel: Is Globalization Muddling the Middle Class?," Papers 14, Brookings Institution - Working Papers.
  2. Abhijit V. Banerjee & Esther Duflo, 2008. "What Is Middle Class about the Middle Classes around the World?," Journal of Economic Perspectives, American Economic Association, vol. 22(2), pages 3-28, Spring.
  3. Kevin M. Murphy & Andrei Shleifer & Robert W. Vishny, 1988. "Industrialization and the Big Push," NBER Working Papers 2708, National Bureau of Economic Research, Inc.
  4. Wan, Guang Hua, 2001. "Changes in regional inequality in rural China: decomposing the Gini index by income sources," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 45(3), September.
  5. Easterly, William, 2001. " The Middle Class Consensus and Economic Development," Journal of Economic Growth, Springer, vol. 6(4), pages 317-35, December.
  6. Brandt, Loren & Holz, Carsten A, 2006. "Spatial Price Differences in China: Estimates and Implications," Economic Development and Cultural Change, University of Chicago Press, vol. 55(1), pages 43-86, October.
  7. Milanovic, Branko & Yitzhaki, Shlomo, 2002. "Decomposing World Income Distribution: Does the World Have a Middle Class?," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 48(2), pages 155-78, June.
  8. Wan, Guanghua (ed.), 2008. "Inequality and Growth in Modern China," OUP Catalogue, Oxford University Press, number 9780199535194, September.
  9. Homi Kharas, 2010. "The Emerging Middle Class in Developing Countries," OECD Development Centre Working Papers 285, OECD Publishing.
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