In 2010, Brookings Institute offered a report stating that the global "middle class" was set to explode, almost entirely from the transition of China's and India's urban poor populations to the middle class (middle class meaning annual incomes per household of four from $14,600 to $146,000 in PPP (purchasing power parity)).
In 2017, the Institute updated the original work (HERE) reiterating that from 2015 to 2030, China, India, and the remainder of Asia-Pacific would add 2.1 billion or 89% of the new entrants to the already 3.2 billion person global middle class. To round out Brookings' estimate for the middle class from '15 to '30; Europe would add just 9 million (less than 0.4%), N. America 19 million (about 0.8%), Central & S. America about 50 million (2.1%), MENA (Middle East/N. Africa) 90 million (3.9%), and sub-Saharan Africa adding 100 million (4.1%).
I have a major problem with the Brooking Institute's estimates. Generally, I have major issues with the assumptions but specifically regarding China, I believe the Institute is somewhere from significantly wrong to totally wrong regarding future estimates for China's middle class...which is likely to reduce or undo the estimated growth throughout.
Births in China:
Let's begin with China's births, on an average basis per five years, since 1950 (chart below). Peak births took place in the 1965-70 period at just over 30 million annually. But with the introduction of the one-child policy in '71, the UN data makes it plain that China's births continued declining in spite of a continually larger childbearing population (aged 15-45 years old). Even now with the one-child rollback, births are only set to further decline (detailed HERE).
China Childbearing Population:
Of course, after decades of declining births, the annual growth of the child bearing population (15-45yrs/old) began decelerating (chart below). And after 20 years of deceleration, the population began declining as of 2007. Slowly at first but by 2017, the childbearing population was had fallen by 88 million with only huge further declines to come.
China Working Age Population:
So it should be no surprise that the annual growth of the working age population (those aged 18-60yrs/old) would begin decelerating as of 1988 (chart below). Then in 2013, the working age population (those aged 18-60 years old) began shrinking. In a nation with mandatory retirement at age 60, this matters. So far, the working age population has "only" declined by 9 million. However, in a nation with net emigration, we know the maximum possible workforce. And it is set to decline...massively. By 2035, there will be about 120 million fewer potential workers...or a 15% decline in potential workers, consumers, tax payers, home buyers.
However, as the chart below highlights, now the pace of working age population decline really begins picking up (chart below).
And to offer some perspective on the size of the working age population declines, the chart below. In 2014, the decline was a paltry 150k or about the size of Syracuse, NY. In 2015, China's potential workforce fell by almost an additional million, or about the size of Delaware. And then it was Nebraska, and then Nevada, and in 2018 the additional decline will be equivalent to the lose of Oklahoma. In 2019, China will lose the equivalent of Louisiana, then Virginia, North Carolina, and by 2025 China will be losing the equivalent of New Jersey. It doesn't get better...from 2026 through 2028, China will lose the equivalent of Texas. And over the next seven years, China will lose California.
China Working Age vs. Employees
In a best available "guesstimate" of China's total employees versus its working age population, the chart below points to a strange crossover by 2024. Assuming China just continues to add about a third the employees they have been adding, China's working population will be greater than its potential workforce? Now in most places, you would say that is impossible...and you would be right.
China Working Age vs. Retirees:
For perspective, consider China's working age population vs. those 60+ years old. From 2013 to 2035, the working age population will decline by <124> million versus retirees growing in number by +218 million (chart below).
But that's not the whole story, as there really are only two regions with growth among their under 65yr/old populations (Africa and India (primarily Northern India)). However, these two account for less than 10% of China's exports. The other 90% of China's export markets are experiencing a rapid deceleration in population growth of their under 65yr/old populations and will likely cease growing prior to 2030. This is in contrast the importing population growth was but is now just a third that...and set to turn negative in a decade.
Debt...The Final Frontier:
The final chart below shows the now declining annual change among China's under 65yr/old population (columns), GDP (dark blue line), and the substitution of far faster rising total debt (red line) in lieu of the missing organic growth. Up to 2000, China had undertaken just $2 trillion in total debt as population growth was robust, driving demand higher. However, since '00, when China's under 65yr/old population growth dramatically slowed, China has pushed out $38 trillion in new debt (primarily to its corporations) that has (and still is), in turn, built massive new debt fueled capacity for a collapsing domestic and global consumer base...what could go wrong? And now that the consumer base is shrinking, the debt issuance and resultant further build out in new capacity, apartment blocks, shopping malls, etc. etc. is likely set to go into a final mal-investment overdrive.
So, China's births have been collapsing for decades, China's child bearing population is now collapsing, and so it follows that China's domestic markets have begun shrinking and this shrinkage will only continue to accelerate. Add to this now their export markets for 90%+ of their exports are hardly growing, and in about a decade, will likewise begin shrinking. Somehow, none of this was even mention worthy in the Brookings Institute report, let alone problematic for a massive increase in a middle class population.
From my viewpoint, no way in hell does this add up to 350 million Chinese moving into the "middle class", regardless how many trillions China throws away building new factories, roads, apartment blocks, and infrastructure for a population that is never coming! As for India, unfortunately, the estimates for middle class growth are every bit as ludicrous, but that is for another day.