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China's prosperity anxiety

Its newfound wealth brings worries about the high cost of housing, conspicuous consumption and a growing generation gap.

September 30, 2010|Doyle McManus

I spent many hours talking with officials during a 10-day trip to China. But what has stuck with me most vividly is not what I learned in government briefings but what I learned from talking with Chinese people about their everyday concerns.

People in China are surprisingly anxious about their newfound prosperity. They worry about the economy producing enough good jobs for millions of new college graduates. They fret about the rising price of housing for newly married couples — at least $45,000 for a modest apartment in Beijing, a small fortune in a country with a per capita income of about $3,000 in urban areas. They worry about whether a real estate bubble has formed. ("Do you think we've overbuilt?" an anxious young official who just bought his first home asked me, under the mistaken assumption that an American would certainly know a real estate bubble when he sees one.) They grouse about the conspicuous consumption of the nouveau riche and wonder where all that money is coming from.

Let's start with consumption. It is conspicuous, at least in the big cities. Sales of Mercedes-Benz and BMW SUVs are booming in a country whose primary commuter vehicle, until recently, was the humble bicycle. At glitzy nightclubs like Club 88, well-dressed young professionals stay up late ordering $100 bottles of vodka. At a shiny new Gucci boutique, a crocodile purse is on sale for $9,000 — and that's in the provincial southwestern city of Chengdu, not cosmopolitan Shanghai or Beijing. "I can remember when 6,000 yuan (about $900) was a lot of money," a salesclerk told one of my colleagues. "Now 60,000 ($9,000) is nothing."

Not surprisingly, that kind of new wealth sometimes engenders resentment among the 1-billion-plus who don't have it yet — and the antipathy is based on more than mere jealousy.

"Chinese people are suspicious of anyone who gets rich," a Beijing businessman told me. "They think the only way to get rich is to know somebody and get in on an inside deal."

Corruption is endemic in China's communist regime — enough so that the government regularly announces new anti-corruption measures. In July, Beijing ordered officials to begin disclosing not only their own incomes and investments but those of their spouses and children too. Many of them, it turned out, had been granting government contracts in return for "gifts," salaries or investment shares for family members. One economist, Wang Xiaolu, has estimated that the unreported (and untaxed) "gray income" of government officials last year came to a staggering 5.4 trillion yuan (about $800 billion at the official exchange rate), according to the Communist Party newspaper, the People's Daily, which has been on a crusade against corruption.

Income inequality is another major concern. Cities and provinces have raised the legal minimum wage. In Guangzhou, for example, it's now 1,100 yuan ($164) a month, more than four times what it was in 1993. But the gap between the wealthy, the emerging middle class and everyone else has both government officials and ordinary citizens worried.

Some communist economists have proposed evening things out a bit by introducing two capitalist inventions — the property tax and the estate tax — to supplement the widely evaded income tax. But those ideas have touched off a debate within the Communist Party over the question, familiar in the West, of whether higher taxes will discourage entrepreneurship.

Another worry, for some, is the growing generation gap.

The Chinese talk about the "post-'80s" generation — people under 30, who have grown up knowing only economic reform and prosperity. Many of those younger workers, one study found, are abandoning Chinese culture's traditional goal of "harmony" and are instead pursuing a personal goal of "identity."

"We're individualistic, creative, independence-seeking," a 30-year-old bureaucrat told me with a slightly self-mocking smile. "And there's a post-'90s generation too," he added. "They're completely Westernized."

All this newly minted attitude has parents worried. "This generation" — the post-'80s cohort — "is spoiled," psychiatrist Li Zhongyu complained to the government-owned China Daily. "They don't know what responsibility is." One commonly heard view is that the post-'80s are so demanding because they are all only children, born — and then cosseted — under the population control policy known as "one family, one child."

The Chinese economy needs the younger generation to be fully engaged. Thanks to "one child," the size of the labor force aged 20 to 29 shrank by almost 15% in the last decade. And China's population is aging fast; by 2035, economists say, there will be two retirees for each worker. By then, the population, now 1.3 billion, should have peaked at 1.5 billion and started to decline — if the one-child policy holds.

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