Can Chinese workers afford Chinese goods?

Stormy, in comments on my previous post China's labour pains: rising wages, asks if China will be able to buy the goods it now exports? S/he elaborates:

The average Chinese worker today cannot buy the very products China exports. And he certainly will not be able to buy them for quite a long time, if ever.

Let's consider the facts:

Television sets: According to the Chicago-based Museum of Broadcast Communications:

By 1993 China had 230 million TV sets, becoming the nation with the most TV sets in the world. Statistically, every Chinese family now owns a TV set.

Mobile phones: Associated Press reported in February that China claims 400M mobile phone users:

China's mobile phone market, already the world's biggest, has passed 400 million users, the government said Thursday. The number of subscribers on the country's mainland rose 5.4 million in January to 398 million, the official Xinhua News Agency reported, citing the Ministry of Information Industry.  ...Xinhua also said mobile phone customers sent 33.8 billion text messages in January, up 65.7 percent from the same month last year.

That's over 30 text messages a month per adult Chinese citizen!

Supermarkets: Growth has been phenomenal. A November 2004 article by Fred Gale and Thomas Reardon in US Department of Agriculture magazine AgExporter, China’s Modernizing Supermarket Sector Presents Major Opportunities for U.S. Agricultural Exporters (PDF), reports that:

Chinese supermarkets skyrocketed from just one outlet in 1990 to approximately 60,000 stores, with an estimated $71 billion in sales, by 2003, according to the Chinese Chain Store and Franchise Association. Growth in the industry that took several decades in the United States and Europe has occurred in a single decade in China. Supermarket sales in Shanghai alone during 2003 were estimated at $5 billion, equivalent to half of Shanghai's retail food sales.

And that was back in 2003; supermarket growth has continue to surge ahead since then. The authors argue that access to supermarkets raises living standards:

Supermarkets are rapidly gaining a competitive edge over ..traditional retailers. They offer a cleaner, more comfortable and convenient shopping environment. Quality is generally better and more standardized. In the case of packaged foods, shoppers do not have to haggle over prices, and they can trust product measures and units. Supermarkets offer a wider array of products than do traditional shops.

I doubt many readers would disagree with that statement.

Refrigerators: Ther has been rapid growth, according to Edith Chenault from Texas A&M University:

In 1985, only 7 percent of the total urban population of China owned a refrigerator ...In rural areas, that number was probably closer to zero. That refrigerator was a small, single-door model and cost several months' wages. Ownership increased to 70 percent of the urban population in 1990.

The 2004 Gale and Reardon article cited above reported that "almost 90% of urban Chinese households now have home refrigerators". OK, not yet 100% - but not that far off.

Microwaves: An October 2004 China Daily article, Facts, figures reveal better life has dawned, reports on a 2003 China Marketing and Media Study of over 70,000 Chinese consumers:

Just two or three years ago, microwave ovens were regarded as a "luxury items" costing at least 3,000 yuan (US$362). Most families could not afford one. But now it is only an everyday home electrical appliance priced at some hundreds of yuan and considered an essential cooking appliance for Chinese. ...According to the CMMS data, 34.9 per cent of people surveyed had microwave ovens in 2000, while the figure increased to 47.5 per cent last year.

Water heaters: Citing again the 2003 China Marketing and Media Study:

Today, 72.5 per cent of Chinese families use water heaters, CMMS data says. Some 10 years ago, many Chinese went to public baths once or twice a week, due to their poor living conditions. The crowding and the noise at the public baths is still fresh in many people's memories.

Imported goods: Citing again the Gale and Reardon USDA AgExporter article:

Imported foods, until recently a rarity in China, are now widely available in Chinese supermarkets.Washington apples, California oranges and wines, lychees from Thailand, butter from New Zealand and cheeses from France are commonly found on supermarket shelves.

Supermarkets feature many international food brands, such as Kellogg’s cereals, Hormel sausages and hot dogs, Lay’s potato chips, Nestlé and Danone milk products, McCormick jellies and Skippy peanut butter, many of which are manufactured locally, albeit sometimes with imported ingredients.

Eating out: There has been rapid growth in cafes, restaurants and other food vendors. According to a 2005 US Department of Agriculture report, Commercialization of Food Consumption in Rural China:

During the 1990s, the number of restaurants, cafeterias, and other food vendors grew rapidly, even in rural areas. It became easier to travel to towns and cities for restaurant meals, and rural people ate more meals at factory canteens and other work sites.

...Spending on food away from home is one of the fastest rising expenditure items in rural China. In 2001, expenditures on food away from home exceeded expenditures on durable goods.

Other durables goods: The 2003 China Marketing and Media Study found that 68 per cent of Chinese families had video players, more than 50 per cent of families had air-conditioners, and 30 per cent of people surveyed had computers. Moreover, those numbers will have grown rapidly in the three years since the survey was conducted.

Considering China's middle class is just one-fifth of the population (200-300 million), these figures indicate that items which only a few years ago were unaffordable 'luxury goods' are now available not just to the growing middle class but to a majority of Chinese households, including many working class families.  So in answer to Stormy's question - yes, the average Chinese worker today can - and indeed are - buying many of the products China exports.

Comments

[John Booke]

Stormy specifically states that the Chinese cannot afford the products it "exports." Probably secondary to more "features" and higher "quality" requirements in the US market. For instance a Geely car sold in China would not meet US standards. That car sells for $7,000 US. Wonder how many Americans would buy at that price if US standards were relaxex?

[ElamBend]

One of the shocks to British troops when they came to America during the American Independance war was the material wealth of Americans. Right now, many Chinese are experiencing the same phenomena. I'd be willing to bet that the average Chinese city consumer has a purchasing power (in terms of goods) that excedes some western countries. Also, much of what is made in China for export is sold out the back door of Chinese factories in pirate form.

[ElamBend]

Also, Wal-Mart is expanding its stores in China as quite a clip. (Imagine the savings, their suppliers are right down the block!) When a Wal-Mart opened the the rural area that I grew up in, it brought material wealth that was before only available and hour's drive (at least) away. The town with the Wal-Mart has significantly expanded its commercial retail developement and Walmart has built a new store with a large implement store taking over the old store building.
Don't forget, few countries benefit from having a large choice of products. The existence of Wal-Mart in China means that the Chinese are now starting to enjoy such a thing.

[Stormy]

John Booke:

Exactly right. I merely used the "average" wage Business Week provided. The math is inescapable. The “average” Chinese simply cannot be buying many of the products it is exporting to America, especially those produce by American firms in China.

New Economists simply cannot have it both ways. How does it square the Business Week data with its latest post?

Either Business Week is wrong about the "average" or there is some mysterious quantum effect here that is unnoticed. The only possibility is the rise of credit cards and loans.

There is much to be argued here. But for now I will keep the argument as focused as possible.

[Stormy]

Looking at the article that New Economists now cites, I would ask the following:

1) Is sampling 70,000 consumers in major cities a statistically accurate slice of a population of 1.3 billion people? With my crude math, the survey covers 7 people for every 1.3 million. I would suggest there is more hype than accuracy in the China Daily article.

2) Note that the survey does not touch those living outside the major cities—a vast population.

We can now see the silliness of the claim that 75% of Chinese now use water heaters. Let us suppose that the average family size in China is approximately 3.39 (as if 2002 according to the China Daily). Doing the math, I come up with 385,250,737 water heaters. Who got that contract?

Time to separate PR from hard facts.

[Arthur Eckart]

I agree. From the statistics I read about China, there are roughly 1 billion peasants earning less than $3 a day and half of them earn less than $1 a day. Also, I agree, random samples taken in relatively high income cities would be inaccurate for the population. The Chinese government could easily manipulate statistics, to present a false view, for greater leverage in the global economy. It has no accountability.

[Marcelo]

Can someone help me to find hourly wages and/or labour costs statistics in China?

[Arthur Eckart]

Here's a link for Chinese hourly earnings in 2002: http://www.bls.gov/opub/mlr/2005/08/art3exc.htm

[Arthur Eckart]

Here's another link about Chinese wages. It seems, Judith Banister is a leading expert in this area: http://www.businessweek.com/bwdaily/dnflash/dec2004/nf2004122_6762_db039.htm

[Marty]

Here is a nice breakout of the current distribution of wealth in China, from the Economist.

[Chang]

Of course chinese workers can afford Chinese goods....

I am from a 'middle-class' (chinese standard) family in a northeastern city, not so affluent comparing to Beijing or Shanghai. We have 2 TV sets, desktop PC, audio system, fridge , dvd player.. you name it.. My dad is one of the 'cool dads', he bought a digital video recorder and laptop last year. My parents just bought a retirement apartment in southern china (in cash, chinese people are not used to mortgage yet)..I have never worked and am still in school working on my PhD, thus I contributed nothing to my family, only college expenses and stuffs they put on me.

Now, I am not bragging about my parents, nor am I bragging about china.. I am just saying that please keep in mind that Chinese people save like crazy.. my parents put almost 90% of their income into their bank account and buy some 'big' stuffs from time to time.

All in all, maybe cars are still thought as 'luxury goods' for most of the Chinese people, but other than that, you can find most of the stuffs in an american home(I've been to quite a few) in an above average chinese home as well, maybe not in the same quality..(smaller size or capacity, etc).. you get the picture

[Chang]

To Arthur Eckart,

Please get your stats right.. There are NOT 1 billion peasants in China.. you got that totally wrong.

The official stats is around 600-700 million rural population, roughly half of the Chinese population .. Now, all the workers in those 'sweatshops' are from rural area.. and they are NOT counted as city citizens if you understand the chinese system.. And all of the construction workers are from rural area, too.. you do the maths.. actually a lot of the farmlands are now run by old people left in the villages coz the youth are working in the cities

By the way, it seems that you have some problem with the Chinese communist goverment.. Having lived in the US for several years, I totally understand. I am a big fan of free speech and free press.. But the truth is that they are doing all right economically.. yes, I travelled a lot in China and that's what I have witnessed

[Santosh]

Chang, ignore Arthur Eckart. He is the resident China-basher on this blog. Nothing you say will convince him of his doom and gloom on China.

Part of what is sustaining the high growth rates in China today is the domestic market.

[Kelvin]

Hi, Mr. Arthur Echart,
Have you visited China or Inida? I have been living in China, Europe, and USA for many years. I think that the best way to learn international economy is to visit different countries by yourself. Text books, TV, and newspapers often give you misleading information.

[Deni]

I agree with Mr. Arthur Echart to some extent.

A little bit on my background first. I grew up in an affluent city in China and went to college in US. I'm now living in poverty-striken midwest China, working for an NGO. I've also traveled extensively to other parts of rural China. So I think I can offer you a reliable picture of the "average Chinese," without dwelling into the official statistics.

Some crude observations:
1. In midwest cities, a typical high-school or college graduate here earns 1200yuan (USD150) per month.
2. Civil servants (policemen, department head at county level, etc) earn less than 1000yuan per month. (i.e. excluding embezzlement)
3. Even in the "urbanized rural areas" (e.g. the centre of several rural towns), not all the families have refrigerators, but a majority of households do have cell phones.
4. In the real rural areas (which still accounts for half of the country's population), monthly household income is as low as 200yuan(US$25). Refrigerators are extremely rare. Many households do have TV, but many of those are still black-and-white TVs.
5. The price of a cell phone is approx 1000yuan (US$125).
6. For various reasons, many who worked in sweatshops in cities did return to their rural homes after a few years. i.e. The migration to cities is only temporary in many cases.

I wish I could provide more "scientific" data...There are numerous articles written by researchers and academics documenting the economic conditions of rural China. (Available only in Chinese though, unfortunately...)

The life of the median Chinese won't be imaginable even for people in coastal China.

I hope the above helps you draw a more accurate conclusion.

[nigel]

It is said that if China had the same frequency of newspaper deliveries per person as in America there would be no more trees in the world. Also if China and India were to consume as much per person as America it would require two whole new earths. You get the point? It is impossible for a nation like China to consume as much as a person in America at this present time; it just wouldn't be sustainable. However maybe the world can still support a whole heap of materialistic and wealthy Chinese, but Indians as well? I don't think so. For there to be rich people there needs to be poor people.