Economic Growth of China Funded by Trade Surpluses since 1990's

Let's use a basic definition of middle class as income levels sufficient to meet basic needs plus  provide discretionary funds for (luxury goods such as appliances) leisure, travel and comforts.  As the chart notes, the largest group of urban Chinese household consumers are Middle Class now (54%).  By 2022, it is estimated that about half of this group will rise to the Upper Middle class, with greater incomes and financial flexibility for spending.  Also note the decline of the poor, from 29% of households in 2012 to 16% range in a few years. Perhaps the most important economic miracle of China over three decades +is decreasing poverty from 80%+ of the population to current levels.  An incredible  success story!

​Trade declines

So what happened?   How can an agrarian economy fast forward to a major industrial power in a few decades?  For over thirty years, China has taken in hundreds of Billions of US dollars and other currencies to invest in their growth. And our open market policies aided and abetted the process.  Note the chart of income bands.  In the 1980's, about 90% of the Chinese population was poor.  Today, poverty has almost been wiped out due to the biggest transfer of wealth (Trade Surpluses) in history.  And the people of China have benefited along with their economy.

​Source of Wealth of people Declines

​China's Middle Class today

After three years of intense negotiations, The US and China reached agreement on comprehensive trade issues that include an opening up of the mainland China market for US products by farmers, manufacturers, and financial institutions.  For the first time ever, Consumers in China will have access to products and services made in the USA.   The chart noted outlines the sectors that will generate sales revenues and increased profits.

Currency Value Declines 

​So how will the growing affluence of the people of China emerge?

​China Economy

As the chart notes, the priorities for spending of discretionary funds are expected to center on transportation (cars), communication (cell phones, ipads) recreation (travel to foreign countries) and education.   Looks a lot like middle class spending all over the globe!

China Trade Deal: What's in it for USA?