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Growth of middle class sluggish in China

Last updated on: April 2, 2012 18:03 IST

Growth of middle class sluggish in China

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K J M Varma in Beijing

China may be the home to a rising number of billionaires but the growth of middle class, the main requisite for its social stability, remained sluggish due to concentration of money in just one per cent of wealthy Chinese, a top economist said.

A great number of billionaires have emerged from China, but fostering the country's middle classes should be a top priority in order to increase consumer spending, Xiang Bing, founder and dean of the Cheung Kong Graduate School of Business said.

The number of Chinese billionaires may overtake the US in the next five to 10 years, but the rise of middle class has been sluggish, Xiang told state-run China Daily at the Boao Forum for Asia conference.

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Photographs: Reuters

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According to the economists, the country's Gini coefficient is estimated to be as high as 0.52 in 2011, from 0.37 in 2007.

The top one per cent of affluent Chinese families hold 41.4 per cent of the nation's wealth, he said, citing a World Bank 2010 report.

He said private sector should take the lead in sharing the wealth with their employees and cited the case of Ren Zhengfei, founder of a leading Chinese telecom equipment provider Huawei Technologies, as a model to follow.

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Photographs: David Gray/Reuters

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Ren owns only 1.42 percent of the equity shares of the company, while the rest is held by employees.

Most Chinese entrepreneurs remain ignorant of the benefits of the establishment of a sole middle class and, therefore, do not take measures to bring their employees into the fold of the business, he said.

Also, to tackle the challenge, the government should make adjustments to resource allocation.

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Photographs: Reuters
Tags: Ren , China

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Currently, national wealth is unequally distributed among the population, Xiang said.

The issue of wealth inequality should be seriously dealt with and reforms should be made to promote long-term economic stability, he said.

The success of China's entrepreneurs has been largely attributed to low production costs, he said.

With the enforcement of stricter environmental rules and labour laws, the cost of Chinese products will increase accordingly, forcing businesses to increasingly rely on domestic middle-class consumers.



Tags: China , Xiang

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