Middle Class Musings: Navigating China's Wealthy Waters

Sean Zhu / 2023-12-16

Nowadays, the term “middle class” seems to have acquired a negative connotation in various countries. A few days ago, I discussed the situation of the American middle class with a teacher living in the United States. Today, let’s talk about China’s middle class. Up to now, no one has been able to provide an accurate definition. Here’s a reference from the “Hurun Wealth Report”:

  • Wealthy families: assets of 6 million RMB
  • High net worth families: assets of tens of millions RMB
  • Ultra-high net worth families: assets exceeding hundreds of millions RMB

If we consider the commonly used 4% capital return rate, the median for high net worth is 50 million RMB. The corresponding risk-free capital annual income is approximately: 240,000 RMB, 2 million RMB, 4 million RMB. And 4 million RMB is basically the ceiling for most Chinese people following the path of studying, employment, promotion, and becoming professional managers. For example, positions like P9 in internet giants, regional directors in foreign companies, partners in consulting/law firms, managing directors in investment banks, etc. These are all legal taxable incomes, and regardless of how salary is structured, the overall tax rate is roughly between 35% to 40%. This also means that the labor benefit corresponding to a hundred million RMB in assets is roughly an annual salary of 6.5 million RMB. For household income, it is still possible to achieve this.

Is it possible to break free from the middle class on this path?

The career of Chinese professional managers starts from undergraduate/master’s degree, roughly about 25 years. Since ancient times, the workplace has been like a brothel, not allowing one to see old age within. If any readers accidentally pursued a Ph.D., please close this article:). During this period, assuming both luck and ability are good, the after-tax family income ceiling is 50 million RMB. Here, we do not consider the increase in the average social remuneration because every raise for the middle class corresponds to another adjustment of the wealth threshold in society. This doesn’t even take into account economic downturns, financial crises, substantial depreciation of fixed assets, unemployment crises, and so on. Therefore, the path to the middle class is nothing but a dream. It may seem like the safest route, but it’s actually filled with thorns. If you lack clear self-awareness, the higher you fly, the harder you’ll fall.

How to crack this?

Abstain from what the middle class is fond of doing. There are only two or three good opportunities. You must fish where there are fish, respect objective facts, find your own field, build and continuously expand the means of production. Seek a certain degree of monopoly. Time serves as a catalyst, and only by continuously accelerating and breaking through gravity can you make it.

Don’t go gently into that good night.


Last modified on 2024-05-16