The author has been described by News Ltd as an "iconoclast", "Svengali", a pollie's "economist muse", and "pungently accurate". Fairfax says he is a "Renaissance man" and "one of Australia’s most respected analysts." Stephen Koukoulas concludes that he is "85% right", and "would make a great Opposition leader." Terry McCrann claims the author thinks "‘nuance’ is a trendy village in the south of France", but can be "scintillating" when he thinks "clearly". The ACTU reckons he’s "an enigma wrapped in a Bloomberg terminal, wrapped in some apparently well-honed abs."

Wednesday, January 5, 2011

The emergence of the Chinese and Indian middle classes

From the FT:

"Dragonomics now estimates 300m people – 23 per cent of the population – have significant discretionary spending and live in cities large enough to be accessible by big companies. If those 300m, who belong to what Dragonomics calls “consuming China”, were a nation, they would live in an economy two-thirds the size of Germany’s.

McKinsey, another consultancy, expects the middle class to expand from 29 per cent of China’s 190m urban households now to 75 per cent of 372m urban households in 2025. “The upper middle class are the ones that are ready to buy a small apartment, that have a car, that think about leisure activities more,” says Max Magni, head of the consumer products practice in Greater China. Those in the band below are “starting to live in buildings with multiple apartments, so they start to care about what other people think about them and spend accordingly”, he says. The lower middle class are those recently able to afford more than the bare necessities.

The emergence of an Asian middle class is certainly not limited to China. Ireena Vittal, a retail specialist at McKinsey, says India’s 1.2bn people can be divided into roughly 250m households. Of those, 100m live in poverty and have little realistic prospect of attaining middle-class status. Just 2m households enjoy the same standard of living as rich counterparts in the US or Europe. The interesting segment from a retail standpoint is the next level down, she says. There are 14m-15m households with an annual income of $7,000-$10,000 – a number set to explode to 40m households, or 200m people, within five years.

India is like China in 2001, says Ms Vittal. “After two decades of systemic growth, the whole bell curve of income distribution moves to the right.”

These households spend a lower proportion of income on food, devoting more to housing, private education, healthcare, motorcycles, kitchen fittings, air conditioners and clothes, she says. Even if India’s economy grows at an annual 7.3 per cent – below the current 8.5 per cent – Mc-Kinsey reckons that by 2025 it would have a middle class of 580m people."