First coined by two World Bank experts in 2007, the middle-income trap phenomenon—the existence of which is disputed by some economists—describes how growth in developing countries tends to stagnate when gross national income (GNI) per capita rises above a certain level, as higher wages push up production costs. Countries can become “stuck in the middle” as they struggle to compete with low-income newcomers where labor costs are still low, and advanced high-income economies with strong innovation. Since 1960, only 15 countries have escaped the“middle-income trap.” Can China beat the odds?
A fundamental generational change in attitude is happening: business people in China have started to question lavish banquets with too much bajiu, and new approaches to health and wellness are coming into vogue—particularly among the young, hip and urban. Rising with this trend is a multibillion-dollar fitness and food industry. Fitness apps are being downloaded by the tens of millions, and gyms are popping up almost everywhere you look in major cities. Market researchers predict that the gym, health and fitness clubs industry is to generate $5.81 billion, and that does not include sales of health food, which seems to be a craze all its own.
The emerging middle class is the starting point for many discussions on China’s economy and society. But who are these people that, as Professor Luigi Tomba puts it, are “going to be at the epicenter of every social change that is going to happen” in China? And more importantly, where do they come from? The terms applied to them are misleading. Locally they are something of an economic elite, and even so have not reached the wealth of their supposed Western counterparts – in other words, they are not the “middle” of anything. They are also far from uniform.