The Greatest Economic Upheaval Since Genghis Khan

Researching a piece he wrote recently for Siemens’ SOMATOM Sessions magazine, which is produced by Primafila, Australia correspondent Garry Barker came upon a few interesting statistics regarding the Chinese middle class.

Text: Garry Barker, Primafila Australia correspondent
Photos: Creative Commons

The statistics I came across is perhaps more alarming than just interesting: The Chinese middle class, I knew, now numbers 400 million — more than the entire population of the United States or, come to that, of the European Union, with or without Britain. Digging further, however, I found that most economists and futurologists expect that by 2030, a mere 13 years away, the Chinese middle class will number 850 million. By then it will account for 22 per cent of global middle class spending, three times more than the US.  By then, however, the North American and European middle class numbers will be stagnant, meaning the economic power centre of the world will have shifted around Beijing. Without much doubt this is the greatest and most rapid economic and political upheaval since Genghis Khan gave up building power and wealth by raping, pillaging and beheading.

A change of massive consequence

The point is not made to offer the slightest criticism of China but simply to observe that it is inevitable that changes occur, and this is just one of them, albeit of massive consequence.  Nor do I suggest that it means Europeans and Americans will be cast aside, destitute. The smartest brains in the world, and for that matter, people of great property, are not necessarily found only in the richest countries, though wealth is a help in creating and supporting them.

But what is, or should be, of concern is how our planet will cope with the demands and supply the consumption of a global middle class at least three times larger than it is now. For example, how will this crowd and its needs, such as growing food, be supplied with water? It’s a finite resource.  There is no more on our whirling space ship now than there was at the beginning of time and so far as our astronomers have discovered, not much more elsewhere in our galaxy, even if we could bring it in. We can, of course, distill fresh water from the sea, but how much salt do you want and what about supplies of seafood?

For energy one might think of uranium, but that’s finite, too, and probably better left in the ground. In any case, we have boundless renewable energy readily harvestable from the sun, let alone from the winds and the tides. Fossil fuels will not be used up by 2030 but they might be then be too  valuable for other purposes to be simply burned. Anyway, by then, pollution will, or should be forbidden. In the meantime, the burgeoning middle classes will want more cars, more roads, more places to park, and on it will go.

An overcrowded world competing for resources

And, perhaps the most difficult problem we humans will by then face, will be the peaceful management of a very over-crowded world competing for its limited resources.  Australians and New Zealanders had a small and temporary demonstration of what happens when a wealthy and aspiring class suddenly discovers something it wants. In this case it was reliable baby formula, a sudden demand by the Chinese middle class sparked by a case of deliberate contamination with melamine powder of the Chinese product and the consequent deaths of many infants.

Anxious Chinese mothers who no longer trusted their local manufacturers sought reliable supplies from Australia and New Zealand so avidly that supermarket shelves in both countries were suddenly emptied by relatives and hired couriers sent from China and nothing was left for domestic buyers. One cannot blame worried Chinese mothers for seeking to protect their children, but the raids on the shelves hit parents in Australia and New Zealand who suddenly could not get supplies and who consequently demanded the Chinese invasion be curtailed.

Manufacturers ramped up production as quickly as they could but demand continued to surge as the Chinese quickly built an efficient, informal buying and shipping system, called diagou, which continued to ship tonnes of baby formula weekly at highly profitable prices.

Chinese interests in Australia and New Zealand

The baby formula situation eventually stabilized but the weight of demand from the Chinese middle class has continued to affect local Australian and New Zealand, this time the housing market. Such has been the demand by Chinese buyers for houses in Australia’s main cities that young first-home buyers now cannot afford to buy. It is said that Sydney now has the most expensive across-the-board housing market in the world. The median price of a suburban house in Sydney or Melbourne is now above $1 million, though average wages have not increased in real terms in the past decade. Ten years ago the same house could have been bought for less than $100,000.

The Chinese Government, concerned that some of these and other purchases amounted to money laundering, and seeking to stem the outflow of money, has now put in place rules that might curtail Chinese interest in buying properties, ranging from suburban cottages to 50-storey  apartment towers and the market is cooling but, locally, damage has been done and the shape of housing in Australia has been changed from a belief that home ownership was an Australian’s right to reluctant acceptance of lifelong renting — if a rentable property can be found and afforded.

In the end, of course, all things settle down — or do I mean that we just become accustomed to upheaval and crisis?