China’s Middle-Income Class, Macroeconomic Growth, and Common Prosperity

Sicular Yang Gustafsson CLM Issue 86 December 2025.pdf

Download PDF • 477KB

The emergence of a prosperous, middle-income class is seen as important for China’s drive for sustained macroeconomic growth and the achievement of common prosperity. Using household survey data and defining “middle income” as being neither poor nor rich in the developed countries, we examine whether China’s middle-income class can fulfill these expectations. We find that China has successfully grown a prosperous middle-income class, and this class contributed to past macroeconomic growth. We also find challenges going forward. In recent years, expansion of the middle-income class has slowed, and its propensity to consume out of income has declined. Furthermore, China’s middle-income population is not overly consumption-oriented, and it differs from the much larger lower-income class in important ways. Recent policy announcements, such as the 2025 “Special Action Plan to Boost Consumption,” place increased emphasis on demand-side policies and contain promising policy initiatives. Their success will depend on implementation, on the commitment of sufficient fiscal resources, and on the response of China’s numerous, heterogeneous households.

A prosperous middle-income class is a central component of China’s current development strategy and a key element in China’s goal of achieving common prosperity (共同富裕). Recent policy documents call for China to make substantial progress toward common prosperity by 2035, at which time China’s GDP per capita should reach that of a mid-level developed country, and the middle-income group will be “significantly expanded.” By 2050. the goal of common prosperity should be basically fulfilled.[1] 

The middle-income class also plays an important part in China’s plan to sustain future macroeconomic growth. Since 2010, China’s macroeconomic growth has slowed. The reasons for slower growth include declining returns on investment and the challenging export environment. In response, policy makers have called for an economic rebalancing (经济再平衡), that is, for a transition from its past investment- and export-led growth model to a consumption-led growth model driven by rising domestic demand.

The notion of rebalancing is not new—it has been part of policy discussions since at least the early 2000s.[2] Discussions of rebalancing reemerged in the early 2010s , but until recently policy  continued to concentrate on supply-side measures such as industrial strategy and new technologies.

Rebalancing has received renewed attention in the 2020s. Policy documents associated with China’s 14th and 15th Five-Year Plans, such as the 2021 “Outline of the Plan for the Strategy to Expand Domestic Demand (2022–2035)” (扩大内需战略规划纲要2022–2035年) and, more recently, the 2025 “Special Action Plan to Boost Consumption” (提振消费专项行动方案) pay serious attention to domestic consumption and propose a range of demand-side policies.[3]

Can China successfully expand its middle-income class, and, if so, can the middle-income class propel consumption-led growth? Here, we look at trends in the recent past to find answers to these questions. Using data from successive rounds of a large, nationwide Chinese household survey, we estimate the size of China’s middle-income class, describe its composition, and examine its consumption. Our estimates span the years 2002 to 2023, revealing the evolution of China’s middle-income class through the Hu-Wen and Xi Jinping leadership eras.

Analysis of the middle-income class requires a definition of “middle-income.” Different definitions are possible. In view of Chinese statements about its common prosperity aspirations, we define “middle-income” as a household income per person that is neither rich nor poor in the developed countries. This definition is straightforward, allows us to measure progress toward China’s policy goals, and reveals the extent to which Chinese households are catching up with middle-class households in the developed world.

We find rapid growth in China’s middle-income class, which by 2023 constituted a substantial share—almost 25 percent—of China’s population. This middle-income class is overwhelmingly urban, relatively well-educated, and mostly wage-earning or salaried rather than entrepreneurial. As the middle-class has expanded, so has its aggregate consumption, thus contributing to growth in national aggregate demand. Nevertheless, China’s middle-income households are not especially consumption-oriented in the sense that they spend a relatively small share of their income on consumption. In the most recent period of our analysis, 2018 to 2023, expansion of the middle-income class slowed, and the share of income they spent on consumption declined. These developments point to possible challenges ahead.

We begin in the next section with an overview of China’s recent macroeconomic trends to provide some context and motivation. A brief description of the household survey data and an explanation of our definition of “middle-income” follow. We then present estimates of the changing size of China’s middle-income class, describe key characteristics of this group, and discuss its propensity to consume and its aggregate consumption. We conclude with a discussion of the implications of these findings and their relevance to China’s recent “Action Plan to Boost Consumption.”

Recent Macroeconomic Trends: Rebalancing?

China’s National Bureau of Statistics (NBS) publishes macroeconomic statistics that, despite some limitations, shed light on major economic trends. Here, we use NBS statistics on gross capital formation, a measure of nationwide investment, and aggregate household consumption, a measure of private consumption by households, to examine shifts in the role of investment versus that of household consumption in China’s economic growth.

Figure 1 shows the percentage shares in GDP of gross capital formation and aggregate household consumption from 2000 to 2024. The prominent role of investment and the secondary role of consumption in GDP is evident. In the early 2000s, investment grew rapidly, faster than GDP, and its share of GDP rose from 34 percent in 2000 to 40 percent in 2003, and further to 47 percent in 2010. Thereafter, its share declined, but it still remained above 40 percent. These investment shares are high by international standards. In middle- and upper-income countries the share of gross capital formation generally ranges from 15 to 30 percent. The share sometimes goes higher during periods of rapid economic growth, but even then, it rarely reaches 40 percent. During South Korea’s economic takeoff, for example, the share of gross capital formation in GDP peaked at 39 percent, and during recent periods of rapid growth in Vietnam and India the shares of gross capital formation peaked at 35 percent.[4] 

Accompanying China’s high investment share is a relatively low share of aggregate household consumption. In the early 2000s, household consumption declined from 47 percent of GDP to an extremely low 36 percent in 2010. Thereafter, it recovered, but after 2015 it stalled at about 40 percent. By comparison, the share of household consumption in most other upper-and middle-income countries exceeds 65 percent.

Figure 1. Gross Capital Formation and Aggregate Household Consumption as Shares of GDP, 2000-2024 (%)

Note: GDP is the sum of gross capital formation, aggregate household consumption, government consumption, and net exports. Figure 1 shows the percentage shares in GDP of the first two of these components.

Source: NBS annual data, https://data.stats.gov.cn/english/easyquery.htm?cn=C01, accessed October 22, 2025.

On the surface, the trends in Figure 1 since 2010 suggest a rebalancing, and some recent reports draw such a conclusion.[5] The NBS publishes estimates of the contributions to GDP growth of consumption versus investment and net exports. It reports that growth in aggregate consumption, including by households and government, contributed 85 percent of GDP growth in 2023 and 44 percent in 2024. These contributions surpassed those from growth in gross capital formation and net exports.[6]  

On closer inspection, however, one can see that the rise in the contribution of consumption to China’s GDP growth is not due to stronger consumption growth but rather to a weakening of the other components of GDP as sources of growth. Figure 2 shows yearly GDP growth (black line) and estimates of the percentage points of GDP growth contributed by growth in total consumption (orange line). The vertical distance between GDP growth and total consumption  is the sum of the contributions of investment and net exports to GDP growth. Household consumption, of central interest here, is the main component of total consumption, and Figure 2 shows the contribution of its growth to GDP growth (red line).

From 2000 to 2010 investment and net exports together were the dominant sources of GDP growth, as indicated by the large gray area in the figure. During this decade, the sum contribution of investment and net exports averaged 5.1 percentage points, and in peak years it exceeded 7 percentage points. The contribution of household consumption growth to GDP growth fluctuated, with an average of 3.8 percentage points during the decade.   

Figure 2: Contribution of Growth in Total and Household Consumption to GDP Growth (percentage points)

Notes:

1.       GDP growth is shown by the black line (and is shown by the black number labels), the percentage-point contribution of total consumption is shown by the orange line (no number labels), and the percentage-point contribution of household consumption is shown by the red line (white number labels). Number labels are shown for odd years.

2.      The percentage-point contribution of total (household) consumption growth to GDP growth equals the absolute change in total (household) consumption expenditures divided by GDP in the prior year.  

3.      NBS publishes the percentage-point contributions of total consumption to GDP growth and the share of household consumption in total consumption. We use this information to estimate the contribution of  household consumption to GDP growth. Note that the share of household consumption in total consumption  has been fairly stable over time, at about 70 percent.   

4.      All numbers are calculated using constant prices.

Sources: NBS annual data at https://data.stats.gov.cn/english/easyquery.htm?cn=C01, accessed November 2, 2025, and NBS, “Statistical Communiqué of the People’s Republic of China on the 2024 National Economic and Social Development,” February 28, 2025, https://www.stats.gov.cn/english/PressRelease/202502/t20250228_1958822.html, accessed  October 30, 2025.

After 2010, the contributions of total and household consumption growth declined slightly. Excluding the pandemic years, household consumption’s contribution remained fairly stable at about 3 percentage points. Concurrently, the contributions of investment and net exports shrank. As a result, consumption became relatively more important for GDP growth.

Was this a rebalancing? Perhaps, but if so, it reflected a weakening in investment- and export-led growth rather than an enlargement of consumption-led growth. Ideally, rebalancing would involve a positive increase in consumption’s contribution to GDP growth. In fact, from 2010 to 2024 consumption’s percentage-point contribution was slightly lower than it had been previously.

We conclude from these macroeconomic trends that as of 2024 consumption in total and by households did not yet play a dynamic leading role in macroeconomic growth. Analysis of the household survey data, to which we now turn, shows that these lackluster trends in consumption occurred despite the expansion of China’s middle-income class.

Data and a Definition of “Middle-Income”

For our analysis, we use household survey data from the 2002, 2007, 2013, 2018, and 2023 rounds of the China Household Income Project (CHIP).[7] The CHIP surveys comprise large, nationwide samples spanning the eastern, central, and western regions of China and encompassing urban, rural, and migrant households. The survey collected detailed, comprehensive information on household income and consumption expenditures using real-time diaries. When analyzed with sampling weights, the CHIP data should give nationally representative estimates, with the caveat that high-income households at the extreme top of the income distribution are underrepresented. Since our focus is on the middle-income class, this does not substantially affect our findings.

Using the CHIP data, we classify households into lower-, middle-, and upper-income classes. We then estimate the overall size of the middle-income class and examine its composition and consumption behavior. We define “middle-income” in light of policy statements within China about common prosperity. In such statements, “prosperity” refers to the standards of living in the developed countries. For example, Zhejiang province, which is designated as a demonstration zone for China’s common prosperity program, announced in 2021 the target of reaching levels of household income per capita equal to those in the developed countries by 2035, at which time it would “basically achieve common prosperity.”[8] 

We use the European Union (EU) as representative of developed countries and define “middle income” as having household income per person that is neither poor nor rich by EU standards. We adopt the EU poverty line, which is 60 percent of EU median household income per person, as the dividing line between the lower-income and middle-income classes, and we set the dividing line between the middle- and upper-income classes at 200 percent of EU median income per person. We classify all members of households in the survey dataset with income per person between these cutoffs as belonging to China’s middle-income class.

Our estimations span multiple years. For all years, the cutoffs between income classes are set relative to EU median income from a single year, 2018, with adjustments for changes in the price level so that the real value of the cutoffs is constant over time. Consequently, the cutoffs are fixed goalposts. Our estimated changes in the size of the middle-income class are the result of changes in real income, not changes in the cutoffs or inflation.[9] 

How Fast Has China’s Middle-Income Class Grown?

Figure 3 shows our estimates of the size of China’s middle-income population. From 2002 to 2023, China’s middle-income class expanded markedly, from 10 million to 336 million people. Over these 21 years, average annual growth in the middle-income population was a rapid 18 percent. Growth, however, slowed down over time from over 50 percent per year in 2002–2007 to 12 percent per year in 2007–2018, and to a much slower 3 percent per year in 2018–2023. 

Figure 3: The Size of China’s Middle-Income Class, 2002 to 2023

Source: Authors’ estimates using the CHIP data.

As China’s middle-income class expanded, it grew from being a trivial to a substantial segment of the national population (Table 1). In 2002, it constituted less than 1 percent of the population; by 2023, it constituted 24 percent of the population. This expansion was made possible by the sustained growth of household incomes in the lower-income class, which enabled lower-income households to graduate into the middle-income class. Growth in the population share of the middle-income class was thus accompanied by a decline in that of the lower-income class. Nevertheless, in 2023 the lower-income class still constituted the large majority—75 percent—of China’s population. The upper-income class, like the middle-income class, grew, but it remained small, at less than 2 percent of the population.[10]

Table 1: Composition of China’s Population by Income Class, 2002–2023 (%)

Year	Lower-income	Middle-income	Upper-income
2002	99.2	0.8	0.0
2007	93.4	6.6	0.0
2013	88.3	11.5	0.3
2018	78.4	20.8	0.9
2023	75.0	23.8	1.2

Source: Authors’ estimates using the CHIP data.

Characteristics of China’s Middle-Income Class

Several characteristics of China’s middle-income class are noteworthy. First, it is relatively well-off compared to the rest of China’s population. In 2023, for example, the average household income per person for the middle-income class was 74 percent higher than the national average household income per person. Those who reached the middle-income class were thus firmly in the upper half of China’s income distribution.

Second, the expansion of China’s middle-income class has been almost entirely an urban phenomenon (Table 2). Except for in 2002, more than 90 percent of the middle-income class resided in urban areas. Furthermore, the middle-income class remains predominately formally urban, that is, it consists largely of urban residents with non-agricultural household registrations (hukou). Although representation of rural-urban migrants living in urban areas remains low, it has been rising in recent years, reaching 25 percent of the middle-income class in 2023. Meanwhile, rural residents have remained underrepresented. In all years but 2002, less than 10 percent of the middle-income class was rural. 

Table 2: Composition of China’s Middle-Income Class by Urban and Rural, 2002–2023 (%)

year	Urban	Rural
		Formal urban	Migrant
2002	83.5	2.0	14.5
2007	82.0	14.0	4.0
2013	77.4	14.6	8.0
2018	72.1	19.8	8.1
2023	68.5	24.7	6.8

Note: Formal urban refers to individuals with non-agricultural (非农) hukou or citizen (居民) hukou. Migrant refers to individuals with agricultural (农业) hukou who live in urban areas. Rural refers to individuals with agricultural hukou who reside in rural areas.

Source: Authors’ estimates using the CHIP data.

Third, China’s middle-income households have material lifestyles that in many ways resemble those of their counterparts in the developed countries. They own many of the same consumer durables, such as refrigerators, washing machines, cell phones, and computers. They spend on entertainment, travel, and other leisure activities. Most are homeowners.

Fourth, they are relatively well-educated. In 2023, nearly half of working-age middle-income adults (48 percent) had a post-secondary education. Less than one-third (32 percent) of working-age adults in this group had not completed high school. In comparison, 19 percent of working-age lower-income adults had a post-secondary education, and 62 percent had not completed high school.[11] 

Fifth, the incomes of China’s middle-income households come mainly from wages and salaries or from pensions derived from previous wage or salaried employment. In 2023, individuals in households that derived the majority of their income from wages, salaries, and pensions made up 75 percent of the middle-income class. Moreover, a disproportionate share of this class is employed in state or quasi-state units, such as the civil service, state-owned enterprises, and educational institutions. Relatively few (19 percent) of China’s middle-income class live in households where the majority of income comes from entrepreneurship and private businesses. Such income is much more prevalent in the upper-income classes, where 46 percent of the population live in households that derive the majority of income from entrepreneurship and private business.

Is China’s Middle-Income Class Consumption-Oriented?

Expansion of the middle-income class can generate consumption-led growth if middle-income households spend more on consumption than lower-income households. This is, in fact, the case. In 2023, the average middle-income household spent 96,300 yuan on consumption, as compared to 54,600 yuan among lower-income households. The average consumption gap between middle- and lower-income households thus exceeded 40,000 yuan.

This number, however, does not tell us how much consumption has increased from the movement of a lower-income household into the middle-income class. The expansion of the middle-income class typically results from movement from the top of the lower-income class into the bottom of the middle-income class. The consumption gap between these two types of households is smaller than that between the average households in the two classes. In 2023, the gap in consumption between an average household in the top third of the lower-income class and a household in the bottom third of the middle-income class was 8,600 yuan. Thus, movement from the lower- to the middle-income class can generate positive growth in national aggregate consumption but less than one might expect.[12] 

Are middle-class households consumption-oriented? A useful metric for evaluating consumption orientation is the average propensity to consume out of income (APC). The APC is the share of household income spent on consumption. A high APC indicates that households consume much and save little of their income.

Table 3 reports estimates of the APC for China overall and for each income class. As shown in the right-hand column, the average APC in China overall was 74 percent in 2013, rising to 78 percent in 2018, and then falling to 75 percent in 2023. These APCs are low by international standards.[13] China’s low overall APC is not the fault of its lower-income class. The APC of China’s lower-income households was not so far below that of other countries, at 77 percent in 2013 and 85 percent in 2018 and 2023. China’s overall APC is brought down by its middle- and upper-income households. The APC of China’s middle-income households was below 60 percent in all three years. The APC of China’s upper-income class was even lower, at less than 40 percent. These differences in APC among the income classes reflect an underlying pattern in which the APC declines with income.[14]

Table 3: Household Average Propensity to Consume (APC), by Income Class in 2013, 2018, and 2023 (%)

	Lower	Middle	Upper	All
2013	76.5%	57.2%	38.8%	73.9%
2018	85.0%	57.2%	36.5%	77.9%
2023	84.6%	52.3%	32.0%	75.1%

Notes: The APC is the average share of income spent on consumption. We estimate the APC for each class by first dividing consumption expenditure by income for every household and then by taking the average of the household APC within each class and for China overall.

Source: Authors’ estimates using the CHIP data.

Have Chinese households become more consumption-oriented over time? From 2013 to 2018, China’s national APC rose. This rise was the result of a substantial increase in the APC of lower-income households. From 2018 to 2023, the national APC declined. This fall reflected declines in the APC of the middle- and upper-income classes. Importantly, the APC of the middle-income class fell five percentage points, from 57 percent to 52 percent. We conclude that China’s middle-income class has not been particularly consumption-oriented, and it became less so from 2018 to 2023.       

How much has the middle-income class contributed to growth in national aggregate consumption? Using the CHIP data for 2013, 2018, and 2023, we estimate the contributions to growth in aggregate consumption from the three classes.[15] The results are shown in Table 4.

Table 4: The Contributions of Different Income Classes to Growth in Aggregate Household Consumption, 2013 to 2023

	Lower	Middle	Upper
2013–23	39%	55%	6%
2013–18	29%	65%	6%
2018–23	55%	39%	6%

Notes: Aggregate household consumption is calculated as the weighted sum of per capita consumption expenditure across households in the CHIP sample, with weights based on published population statistics. Growth in consumption is measured in constant prices.

Source: Authors’ calculations using the CHIP data together with population statistics and the Consumer Price Index published by the NBS.

Over the decade from 2013 to 2023, the middle-income class contributed the largest share of growth in aggregate household consumption, at 55 percent. The importance of the middle-income class to consumption growth, however, declined in the latter half of the decade. In the first half of the decade, it contributed 65 percent, but in the second half, it contributed a smaller 39 percent of the growth in aggregate household consumption. Meanwhile, the contribution of the lower-income class rose to 55 percent, and it took over as the major driver of aggregate household consumption growth.

Changes in the contributions of the middle-income class to growth in aggregate household consumption have reflected changes over time in its APC, income, and population size. As shown above, from 2018 to 2023 growth in the size of the middle-income population slowed, and its propensity to consume out of income fell. Regardless, in absolute terms, total consumption by middle-income households increased but by less than the total consumption of lower-income households. 

Implications and China’s 2025 “Special Action Plan to Boost Consumption”

China’s middle-income class has featured prominently in official and unofficial policy discussions. Here, we introduce an aspirational definition of “middle income” that starts from what is found in rich countries. Applying this definition to household data spanning from 2002 to 2023, we find that China has made significant progress in growing a prosperous middle-income class. In 2002, less than 1 percent of China’s population had income comparable to that of the middle-income class in the developed world. By 2023, nearly one-quarter of China’s population had attained this level of prosperity. Despite this expansion, however, most of China’s population has not yet reached the middle-income class. The potential for future expansion is thus large but not a given. Our most recent estimates for 2018 to 2023 show slowing growth in the middle-income class.

The Chinese middle-income class has certain characteristics. It remains concentrated in urban areas, and most members hold an urban hukou. The representation of migrants—individuals with rural hukou who live in cities—has, however, risen in recent years. Very few middle-class households live in rural areas. Most Chinese middle-class households derive the majority of their income from wage employment or from pensions based on former wage employment. Relatively few are self-employed. These characteristics have implications for future policy making.

As China’s middle-income class has expanded, so has its consumption. By our estimates, from 2013 to 2023, the middle-income class was responsible for more than one-half of the growth in China’s national aggregate household consumption. During these years, China’s macroeconomic growth was increasingly driven by consumption. This apparent rebalancing was, however, more the result of the weakening of investment and exports as sources of growth rather than the result of strengthening consumption.

Going forward, can China’s middle-income class support a bona fide rebalancing led by dynamic growth in consumption? Our findings suggest that such an outcome is possible but not guaranteed. Slowing growth in the size of the middle-income class and the decline in its propensity to consume between 2018 and 2023 are concerning.

Our findings point to key considerations for achieving these goals. First, a successful rebalancing will benefit from steps to address the underlying reasons why middle-class households remain reluctant to consume. Research has pointed to a variety of likely factors. These include incomplete systems of public and private insurance, which lead households to hold precautionary savings for health and retirement. Underdeveloped household finance and credit sectors are also a factor, as households that cannot easily borrow to finance large expenditures on housing, large consumer durables, children’s education, weddings, etc., will hold elevated savings.[16] Most middle-class households are homeowners, so the wealth effects from the recent weakness in China’s housing markets have probably also dampened middle-class consumption.[17]    

Second, sustained expansion of China’s middle-income class will require pathways for income growth among China’s lower-income households that have different characteristics than households that achieved middle-income status in the past. Past growth in China’s middle-income class mainly involved the urban hukou population, segments of the population with relatively high levels of education, and households with income derived from employment in formal, state-owned, or quasi-state units. Future growth in this class will need to encompass the migrant and rural populations, the less-educated, and households that rely on informal, less stable forms of employment.

Recent positive trends in the share of migrants in the middle-income class reveal progress on this front. The growing share of migrants in the middle-income class has occurred as China has rolled out its new-style urbanization program, which since 2013 has promoted the acceleration of urbanization, reforms of the hukou system, and measures to better integrate migrants into cities. Continued efforts to break down the barriers associated with hukou and geographic location, together with measures aimed at strengthening education, employment, and pensions for China’s lower-income population, will facilitate the ongoing expansion of the middle-income class.

Third, a successful rebalancing should not overlook the consumption power of the lower-income class. China’s large lower-income class contains China’s most consumption-oriented households. Efforts to expand consumption by this group can therefore make a difference. This group’s relatively high propensity to consume is yet another reason to support employment and income growth among lower-income households. 

In the past, China’s macroeconomic policy program, including efforts to support a rebalancing, relied largely on supply-side measures. Recent policy statements and initiatives suggest this may be changing. Since 2020, the State Council and other leading bodies have issued a series of documents that emphasize demand-side approaches and that include concrete measures targeting household consumption. Notable here is the 2025 “Special Action Plan to Boost Consumption.”

The “Special Action Plan” contains a range of policy aims and measures, many of which address the considerations discussed here. The first section of the plan focuses on achieving growth in wage income, and it proposes measures that will benefit lower-income workers, including support for small and medium-size enterprises, vocational and skills training, strengthening of unemployment insurance, and increases in the minimum wage. Other sections lay out a range of measures that aim to expand the quantity and to improve the quality of household consumption. These include new and expanded fiscal spending to support and strengthen childcare, education, health, pensions, and eldercare, as well as subsidies to households for the replacement and upgrading of large consumer durables, the strengthening of paid leave programs for workers, and improvements in the supply of loans to households, including fiscal subsidies to reduce interest on some personal consumption loans.  

It is as yet unknown how fully the Special Action Plan will be implemented or how effectively it will stimulate consumption. The Plan will require the commitment of substantial government resources at a time when China faces significant fiscal challenges.[18] Its success will thus depend on fiscal developments, and it may require fiscal reform and the diversion of funds from supply-side programs.

Even in a favorable fiscal environment, implementation of demand-side policies may prove challenging. China has long experience with supply-side measures. Implementation of supply-side measures, moreover, benefits from the cooperation of large enterprises and financial institutions that have close historical relationships with the different levels of government. China has less experience with demand-side measures. Implementation of demand-side measures can enlist the cooperation of local governments, large employers, and financial institutions as intermediaries between the government and households. Ultimately, though, the effectiveness of demand-side policies will depend on the responses of China’s numerous, heterogeneous individuals and households.

About the Contributors

Terry Sicular is Professor Emerita of Economics, Western University (Canada), Research Associate at the SOAS China Institute, and Fellow in East Asian Studies (Sinology) at the University of Vienna. Her recent research focuses on topics related to income distribution in China. She has published widely in scholarly journals and has co-edited, with S. Li, H. Sato, and X. Yue,  several contributed volumes, most recently Changing Trends in China’s Inequality (Oxford University Press, 2020). Her joint work with Chinese colleagues has twice received the Sun Yefang Prize in Economic Science.

Xiuna Yang is Senior Research Fellow at the China Development Research Foundation. She obtained her Ph.D. from the Business School of Beijing Normal University. Her research investigates aspects of labor economics in China, including income distribution, the middle-income class, and labor migration. She has published articles in scholarly journals and is co-editor, with B. Gustafsson, of the recent Handbook on Inequality in China (Edward Elgar, 2025).

Björn A. Gustafsson is Professor Emeritus in the Department of Social Work, University of Gothenburg, Sweden. He is also Fellow of the Global Labor Organisation (GLO). He joined the China Household Project (CHIP) in the 1990s and has published widely in economics and China studies scholarly journals. With M. Cai and J. Knight, he co-authored the recent book Economic Transformation and Income Distribution in China Over Three Decades (Cambridge University Press, 2023).

Notes

[1] See 中华人民共和国国民经济和社会发展第十四个五年规划和2035年远景目标纲要, March 12, 2021, https://www.gov.cn/xinwen/2021-03/13/content_5592681.htm; 中共中央 国务院印发《扩大内需战略规划纲要（2022–2035年）》, December 14, 2022, https://www.gov.cn/zhengce/2022-12/14/content_5732067.htm; 为加快构建新发展格局提供有力支撑: 解读扩大内需战略规划纲要, December 15, 2022, https://www.gov.cn/zhengce/2022-12/15/content_5732297.htm; and “Social Equality Required to Attain Common Prosperity,” China Daily, December 6, 2024, https://epaper.chinadaily.com.cn/a/202412/06/WS6752375fa3105c25b38ee40f.html. All accessed November 5, 2025.

[2] Nicholas R. Lardy, “China: Toward a Consumption-Driven Growth Path,” Institute for International Economics Policy Brief 06-6 (October 2006). See China: Toward a Consumption-Driven Growth Path | PIIE, file:///C:/Users/nrh752/Downloads/pb06-6.pdf, accessed October 28,  2025.

[3] See 中共中央 国务院印发《扩大内需战略规划纲要（2022–2035年）》, December 14, 2022, https://www.gov.cn/zhengce/2022-12/14/content_5732067.htm; and 中共中央办公厅 国务院办公厅印发《提振消费专项行动方案》, March 16, 2025, https://www.gov.cn/zhengce/202503/content_7013808.htm, accessed November 5, 2025.

[4] Comparative statistics on the shares of gross capital formation and household consumption in GDP are from the World Bank, https://data.worldbank.org/, accessed  April 1, 2023.

[5] E.g., “How China Powers Up Consumer Spending to Fuel Growth,” People’s Daily, March 7, 2025, https://english.www.gov.cn/news/202503/08/content_WS67cb9570c6d0868f4e8f099f.html, accessed October 31, 2025. 

[6] NBS, China Statistical Yearbook 2024 (Beijing: China Statistics Press, 2024), table 3-14, https://www.stats.gov.cn/sj/ndsj/2024/indexeh.htm; and NBS “Statistical Communiqué of the People’s Republic of China on the 2024 National Economic and Social Development,” February 28, 2025, https://www.stats.gov.cn/english/PressRelease/202502/t20250228_1958822.html, accessed  October 30, 2025. 

[7] For additional details about the 2002, 2007, 2013, and 2018 data, see Xiuna Yang, Terry Sicular, and Björn Gustafsson, “China’s Prosperous Middle Class and Consumption-led Economic Growth: Lessons from Household Survey Data,” The China Quarterly, no.  258 (June 2024): 479–494. Details for the 2023 survey are similar to those for the 2018 survey.

[8] See, e.g., “China's Path to Common Prosperity: Zhejiang Foretells Nation's 2nd Centenary Goal,” Global Times, August 31, 2021, https://www.globaltimes.cn/page/202108/1232960.shtml, accessed  October 20, 2025; and “Zhejiang Announces Concrete Targets for Common Prosperity,” China Daily, June 30, 2021, http://quzhou.chinadaily.com.cn/2021-06/30/c_638380.htm, accessed October 20, 2025.

[9] Further details about the cutoffs and their US dollar and RMB values are available in Yang, Sicular,  and Gustafsson, “China’s Prosperous Middle Class.” 

[10] Due to the underrepresentation of top-income households in the CHIP survey data, especially in the more recent years, the estimates of the size of the upper-income class are likely understated.

[11] We define adults as individuals ages 15 to 64 who are not students.

[12] Ideally, estimation of the additional consumption arising when lower-class households move into the middle-income class would use panel data that follow the same households over time. Unfortunately, panel data with accurate income and consumption information are not available.

[13] As of 2002, the average APC in the EU exceeded 90 percent. The lowest APC in the EU was that in Switzerland, at 82 percent. See https://www.oecd.org/en/data/indicators/household-savings.html#indicator-chart, accessed November 1, 2025.

[14] See Yang, Sicular, and Gustafsson, “China’s Prosperous Middle Class.” 

[15] Our estimates of growth in aggregate household consumption based on the CHIP data are lower than those published by the NBS. We estimate growth in aggregate household consumption in constant prices from 2013 to 2018  at 40 percent, as compared to the NBS published estimate at 47 percent. For 2018 to 2023, our estimate is 17 percent and the NBS published estimates are 28 percent. We cannot fully explain the discrepancy, but it is partly due to differences in the measurement of household consumption, e.g., the NBS household consumption statistics include an estimated value of imputed rents on owner-occupied housing, which we exclude from consumption, and it partly arises because the NBS adjusts its consumption estimates for the under-sampling of top income households using unpublished information from tax records.

[16] See 蔡 昉, “社会福利的竞赛,” 社 会 保 障 评 论 6(2) (March 2022): 36–45; Marcus Chamon, Kai Liu, and Eswar Prasad, “Income Uncertainty and Household Savings in China,” Journal of Development Economics 105(C) (2013): 164–177; Xiaofen Chen, “Why Do Migrant Households Consume So Little?” China Economic Review 49 (2018): 197–209; Christian Dreger, Tongsan Wang, and Yanqun Zhang, “Understanding Chinese Consumption: The Impact of Hukou,” Development and Change 46(6) (2015): 1331–1344; Longmei Zhang, Robin Brooks, Ding Ding, Haiyan Ding, Hui He, Jing Lu, and Rui Mano, “China’s High Savings: Drivers, Prospects, and Policies.” IMF Working Paper, WP/18/277, 2018, International Monetary Fund. Washington, DC, https://www.imf.org/en/Publications/WP/Issues/2018/12/11/Chinas-High-Savings-Drivers-Prospects-and-Policies-46437, accessed November 5, 2025.

[17] Atif Mian, Kamalesh Rao, and Amir Sufi, “Household Balance Sheets, Consumption, and the Economic Slump,” The Quarterly Journal of Economics 128(4) (2013): 1687–1726; Y. Qi, G. Yu, X. Liu, and Y. Ren, “Housing Wealth Appreciation and Heterogeneous Household Consumption: Evidence from China,” PLoS One, 18(10) (2023): e0289712, https://doi.org/10.1371/journal.pone.0289712,

https://pmc.ncbi.nlm.nih.gov/articles/PMC10553299/pdf/pone.0289712.pdf, accessed November 6, 2025.

[18] Christine Wong, “The State of Public Finance in China: Why Tax and Intergovernmental Reform Are Urgently Needed,” in Ligang Song and Yixiao Zhou (eds.), China: Regaining Growth and Momentum After the Pandemic (Canberra: Australian National University Press, 2024), pp. 67–83; Christine Wong, “China’s 2025 Budget: Stimulus, Debt and the Reform Imperative,” National University of Singapore, EAI Commentary No. 89 (April 18, 2025), https://research.nus.edu.sg/eai/wp-content/uploads/2025/04/EAIC-89-20250418-2-2.pdf, accessed November 6, 2025; 蒋 飞, 宏观经济研究中国财政可持续性研究, 长城证券研究报告 | 宏观经济研究*专题报告, December  24, 2024, http://www.cgws.com/cczq/ggdt/ccyj/202412/t20241227_318413.html, accessed November 6, 2025.

Photo credit: Windmemories, CC BY-SA 4.0 <https://creativecommons.org/licenses/by-sa/4.0>, via Wikimedia Commons