The idiom “middle class” has only specific definitions, no outwright meaning is linked with the term even though it is used by most. Actually cities or countries can have their own measure for it that can be based not only on income but also on socio-cultural traits or different goods and services that the group may access. This of course depends on the welfare system, the different types of industries in the region and eventually the variety of cultural behaviours. If we were to define Middle class we would put it as all of the population that is not the 20% poorest or 20% richest. In this essay we are going to try to grasp the notions of how to understand the socio-economic impact of the middle class in Hong Kong and Shenzhen through the study of the housing market in both cities.
The stories of the two cities as well as their population is inextricably linked yet totally different. As the United Kingdom rented the land from China, Hong kong have in modern history been a favoured in terms of economic policy and openness to the western world. It is to no wonder that there were a major contrast between the wealth of the population of Hong Kong and their neighbours in the Guangdong province.
In 1979 Shenzhen, then a fishing village, was declared China’s first special economic zone. Then the city grew rapidly both economically and demographically, at a rate of 30% every year for 30 years, serving as Hong Kong’s productive hinterland. For the population this not only means that wealth is created, eventually increasing the salaries for the middle class, it also pushes towards an evolution of the economy from manufacturing and agriculture to a service economy.
Today however, the roles are changing. Shenzhen has today a comparable number of skyscrapers to Hong Kong, but what about its population? How did the purchasing power evolve? Who is the common man of each city?
As the 3rd most expensive city in the world, where a cup of coffee there cost 6.6$ according to Mercer’s annual cost of living survey, the price of the housing market in Hong Kong is unbelievably high. Actually for most Hongkongers it represents a major obstacle to their indepence. There is today a phenomenon where many knowledge workers have little chances to owning any estate in the City as a they need to pay 10 up to 20% up-front which can represent 10 years of savings for an average bank employee. Unlike the middle class, the poorest have a chance to own their own estate as they have access to subsidised housing, whilst all of the population enjoys subsidized care in hospitals and free basic education. Therefore one can define the part of the population that is not owner of the estate they live in as middle class. This corresponds to a modern definition of the term, that transcends origin, native language or sector of activity to which the subject is connected.
In effect this defined middle class is a surprisingly large group of the Hong Kong population, but how is it in Shenzhen, the neighbouring city in mainland China?
In Shenzhen, the price of the estate has grown into making Shenzhen one of the more expensive cities in China. An average home costing about 55’000 Yuan/sqm almost three times higher than the average of the city Gouangzhou, not far from Shenzhen. China daily even reports that in order to be considered middle class, a person should earn roughly two times the income of the national average.
Like for Hongkongers, the initial investment to buy a house is keeping most from getting their own place as they need to come up with a 70% down payment. Again we can see a pattern where the population can be separated by their ability to afford their household.
This has become a drawback for most companies as their employees are often unable to afford, pushing companies like Huawei to move outside of the central area. This trend is understandable as the prices in Shenzhen, Shanghai and Beijing rose 41.25 percent, 22.5 percent and 15.47 percent year-on-year in July, Index Academy said.
As history goes, winners and losers arise from societal changes. Shenzhen has experienced the largest growth in the history of the world and it wouldn’t be surprising that the local population, or the middle class of 30-something years ago, may have suffered from this large economical growth. Maybe in the way that they could not keep up with the new industries, the mass migration or other possible sources, but actually this is not true and this is due to the Guangdong model.
SHENZHEN AND THE GUANGDONG MODEL
In some parts of China – and especially in Guangdong Province in southern China – rural communities have retained ownership of much of their land when its use is converted into urban neighbourhoods or industrial zones. In these areas, the rural collectives, rather than disappearing, have converted themselves into property companies and have been re-energised and strengthened as rental income pours into their coffers. The native residents, rather than being relocated, usually remain in the village’s old residential area. As beneficiaries of the profits generated by their village collective, they have become a new propertied class, often living in middle-class comfort on their dividends and rents.
We could for instance take the example of the Chen village, in the northern reaches of Shenzhen. The area lies 40 minutes from the city centre by fast elevated commuter rail, with a subway-style train arriving every few minutes. A train station deposits passengers in the centre of Longtou, and the tens of thousands of people who rent flats here are able to travel every day to Shenzhen industrial zones to work. Longtou contains a couple of small factory areas where some of the tenants work, but the city government has designated this section of Shenzhen as largely residential.
The Guangdong model shapes a distinct type of urban development. It has had a major impact on urban planning in Guangzhou and Shenzhen and in the creation of industrial zones in the Pearl River delta and beyond. It is has the flavour of the subtle balance of collective land ownership, local communities that remains from past rural village administration and negotiations between higher level and local authorities
In fine, middle class in both Hong Kong and Shenzhen are well defined by the struggle created from the housing market in both cities. With time, the initiative that the government put in place in the Guangdong region have actually limited the disruptive nature of the unfathomable growth of the region for the local population but might leave the migrant workers, coming by the thousands from all over China in the position of never earning their home.
Romain T & Axel N
http://www.cefc.com.hk/download.php?file=2128e61e33aa2eaf8896e8de5bbb521a&id=100044502 The Guangdong Model of Urbanisation: Collective village land and the making of a new middle class