Editorial: VUCA killed the Middle Class

by Prof. Dr. Wolfgang Georg Arlt FRGS FRAS

Dear readers,

Do you remember the song Video killed the radio star? (The Buggles, you can find it on https://www.youtube.com/watch?v=W8r-tXRLazs). Later the DVD killed the video and after that Netflix killed the DVD and who knows what comes next – Metaverse killing Netflix?

One victim of our VUCA (Volatility, Uncertainty, Complexity & Ambiguity) times is certainly the ever-growing Chinese middle class. Know-all-know-nothing companies like McKinsey have been predicting since years that China will have the biggest middle class in the world, no less than 70% of the population would reach that level by 2022, buying all the cars and designer bags and trips abroad the rest of the world can produce. Chinese sources fantasised rather that certain levels of average income or GDP per person would trigger new waves of consumption and travel, when using averages is a cardinal mistake if you want to understand China. 

If you read the small print, it became obvious even then that on one hand the definition of “middle class” as having an annual (!) household (!) income between 9,000 and 34,000 USD was not really what one would imagine as middle class in Europe or North America. On the other hand, the fact that in China a lot of consumption is not fuelled by income but by wealth (from stock market or real estate business or, let’s say, presents) was not put into consideration either. 

In any way, looking at the economic development of China in the current decade, the pipe dreams of the ubiquitous Chinese consumer are going up in smoke. In the 1850s a shipload of forks and knifes sent to China from England remained unsold simply because nobody was interested to buy them. This time it is rather that the percentage of the population able to buy SUVs and trips to Antarctica is not growing as fast as hoped for. 

Especially the real estate market, responsible for 30% of China’s GDP, seems to collapse step by step. The Ponzi schemes first uncovered for Evergrande are now becoming apparent for many other developers as well. The buyers of apartments all over China have started to refuse to pay part of their mortgage before the apartment has been finished. These payments however were financing the cost of completing the projects. With constantly falling prices for apartments since last autumn, buyers face the fact that in many cases they have signed an agreement to purchase a property at a price which will exceed the selling price once it is finished, with any delay in construction making the gap widening. Buildings of lacking quality have been called “Tofu architecture” in China, now the whole system seems to get wobbly. 

For outbound tourism this is not necessarily a big problem, as outside Greater China it has been anyway the top 10% of the society only who could afford international travel. Most of them will have enough money left for one or two trips abroad a year for business, health, education or leisure. However, the forecasts that the number of passport holders travelling outside China will double or even quadruple as part of the “new middle class” soon, will remain what they had been from the beginning – wishful thinking. 

Luckily, with the help of cross-border sales apps like O+ Mall and others, the not-so-fast-growing-rich Chinese consumers can buy things they would have bought abroad when travelling now within China online, helping to bridge over until the time of double-digit GDP growth rates returning to the country. 

Next week your humble editor will have the pleasure to speak at the AGB ASEAN conference in Manila, therefore we will pause the publication of COTRI Weekly for two weeks, coming back to you on August 9th

As always, all best wishes from Prof. Dr. Wolfgang Georg Arlt and the whole COTRI WEEKLY team!

COTRI Intelligence

COTRI Intelligence is the indispensable source of weekly consulting, analysis, data and news for everybody seriously interested in the post-pandemic Chinese outbound tourism market and changing Chinese consumer preferences.  COTRI Intelligence is published by COTRI China Outbound Tourism Research Institute and edited by Prof. Dr. Wolfgang Georg Arlt FRGS FRAS. Regional partners and Content partners [...]

COTMI Subscription Form

Notice: JavaScript is required for this content.

COTRI Intelligence Presentation

Notice: JavaScript is required for this content.

Business Delegations Brochure

Notice: JavaScript is required for this content.

Marketing Brochure

Notice: JavaScript is required for this content.


Notice: JavaScript is required for this content.


Notice: JavaScript is required for this content.

COTRI Analytics Brochure

Notice: JavaScript is required for this content.

CTT ADD-ONS Brochure

Notice: JavaScript is required for this content.

This website uses cookies. We use cookies to personalise content, provide social media features and to analyse our traffic. You agree by using the website further.

Privacy policy
Social media & sharing icons powered by UltimatelySocial