China strives for a - wince - middle class

At the 16th Communist Party Congress earlier this month, outgoing President Jiang Zemin cited a main goal for China as being what he termed xiao kang - or a well-off life. The 5,000-year-old phrase refers to a condition of prosperity, and evokes something similar to the "car in every garage, and chicken in every pot" adage in the United States.

While the gap between rich and poor here quickly widens, China's leaders are engaged in a delicate dance of words and concepts as they try to create a stable middle class without actually using words loathed by Chairman Mao for their petty bourgeois implications.

"We can't use the term 'middle class' because it implies civic and political cultures that we aren't ready for," says a party official, speaking privately.

"We have to use the term 'middle income,' " he continues. "Our Constitution one day will say it is the government's job to legally protect private assets. But we are not yet at that point."

In an era of privatization, China is tailoring policies to benefit the "middle- income" group - an ideal set of educated consumers who will earn between $3,000 and $12,000 a year. Such changes include expanding teachers' salaries and pension and healthcare plans for urban residents, as well as tax breaks, loans, and new advantages for entrepreneurs.

One reason China's leaders want at least an approximation of a middle class is to provide a steadying social anchor between the great chunk of China's wealth, held by several hundred families, and the rest of the population. Roughly 70 percent of 1.3 billion Chinese are peasants who earn about $100 a year. Along with the deterioration of state industry - workers once championed as ushers of a glorious revolution, but now idle - the current social dynamics are troubling.

"The main reason to focus on developing a middle group is social stability," says the party official. "The income gap is the core of our concern."

Another reason is economic self-sufficiency. In the past decade, China has attracted some $800 billion in foreign investment - used to build Beijing and Shanghai into metropolises rivaling any in Asia. Yet for China to progress, planners here say, what is needed is a middle-income group capable of buying Chinese products and slowing China's dependency on overseas capital that seeks cheap labor.

But what China wants, and what China can say it wants, are two different things, analysts say. While entrepreneurs are welcomed into the Communist Party to keep an eye on new wealth, that's not the same as talking about the creation of a middle class - since no officials are ready to suggest that workers are no longer "the vanguard" of the people.

Lu Xueyi, a top scholar in Beijing with the Chinese Academy of Social Sciences, pointed out in a working session at the Party Congress, "In Western countries, those at a middle-income level are called the middle classes. Politically, they are in line with the government of the day and the ruling party. Economically, they are steady consumers and a major force in economic life. They make stable investments in education and are producers and consumers of advanced culture. In this way, larger middle-income groups lead to more stable societies."

But such ideas are still controversial. Dr. Lu's new book, "The Analysis of All Classes in China," was pulled off the shelves this year. In a call to the official publisher, a person who would not give his name said, "The book does not correctly define the workers as the leading class. It sets the middle class ahead of workers."

At a restaurant near the upscale Pacific Century Plaza in downtown Beijing, two young businessmen both hope China will develop a middle class, but offer very different thoughts about it.

"The wealth gap is so great in China today, and the contradictions between the city and the country are growing so badly, that we need a middle class," says one Shanghai-born, US-educated financier at a Chinese company. "We can't have reforms, political or economic, without an educated, rational middle group. I think it is happening."

The other young man, working on a computer spreadsheet for his marketing firm, says, "We will not have a middle class outside Beijing and Shanghai anytime soon. I feel this is just a saying to add color to the Party Congress. Chinese don't have a mentality for middle class. Changing that won't be easy ... at the most, 1 percent of China is middle class, by any Western definition."

Officials here say the range of middle-income earners runs from 5 percent to 7 percent. They argue that joint ventures in China's leading cities have slowly begun to incubate a middle-income aspiration. Yet whether the "joint venture culture" will translate to the creation of an independent Chinese middle class is questioned.

"Last year, about 90 percent of the taxes paid in Beijing were from employees of joint ventures," says one British-based executive. "I'm all for a middle class. How you get there is the question."

For several years, the buzz in big cities is for more private schools, more appliance purchases, more children studying piano and English, more trips to movies.

"To me, middle class means Chinese who go on vacation, own a car and an apartment, belong to a sports club, and think about 'life quality,' " says the marketing firm manager. "OK. But this will take more than slogans."

Such comfortable aspirations also cut strongly against most of the history of communist China, which was built on dreams of revolution.

"In 1949, Mao told peasants, who really didn't know much about Marxist theory, that revolution meant getting rid of landlords and landowners. Mao then began a workers' revolution, in which workers were the heroes, and would be a stable force," says one older scholar.

However, since China has gone through liberal economic reforms, workers are no longer regarded in anything but name as the leading force. More and more, they have become the unemployed force as state-owned companies close or restructure. "We are fed up with class questions," the scholar says. "Until the late '70s, middle class meant petty bourgeoisie. It meant one was not a proletarian, not revolutionary, and not patriotic."

China's push for a middle class, some analysts say, also benefits China's image abroad. They argue it projects a picture of stable investment, a potential market, and wards off fears of a current lack of contract law, and the storied problems of Chinese businesses taking advantage of joint-venture partners.