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In 2021, President Xi Jinping triumphantly declared that the rising tide had lifted all boats — the Communist Party had won “complete victory” over absolute poverty — and pledged to pursue “common prosperity”1 for all. China does deserve credit: Since 1978 it has lifted close to 800 million people out of extreme poverty, three-quarters of the global total, according to the World Bank. But to claim that victory, Beijing used a poverty line of about $2.30 a day, which critics contend is too low.
Against the World Bank’s $8.30-a-day poverty line for households in upper-middle-income countries — China’s current group — more than one-fifth of its population remained poor as of 2022. Against the $30 a day that marks poverty in the rich-country cohort China will be joining, the average citizen falls well short. China, in other words, is becoming a high-income country whose people, by any rich-world measure, remain exceedingly poor.
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Both sets of facts flow from the same political economy, and the tension between them will define China’s next quarter-century — turning less on whether the country grows rich, which by conventional measures it largely has, than on what it does about the millions left behind and the middle class it never allowed to form.
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[When China entered] the WTO, the bet was that prosperity would beget a middle class that would demand a say. But Beijing has spent two decades ensuring that constituency never takes shape, since time and time again history has shown that a secure, propertied population is where pressure for a political voice collects.
The evidence on social activism is instructive. In November 2022 a deadly apartment fire in remote Urumqi set off street protests against zero-Covid lockdowns that swelled into the “white paper revolution,” named after the blank sheets of paper demonstrators held up in wordless dissent. But these protests erupted not on China’s poor periphery but in its bourgeois core — along Urumqi Road in Shanghai, the country’s wealthiest city, and across elite campuses like Beijing’s Tsinghua University. The demonstrations confirmed the Party’s operating assumption: It is not hardship that is politically dangerous, but a comfortable middle class.
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On the institutions that underpin a secure middle class — most importantly a social safety net — China diverges sharply from its peers. Social spending sits near 10% of gross domestic product, roughly half the average for countries in the Organization for Economic Cooperation and Development. Xi often warns that welfare programs breed idleness, a surprising stance for an avowed Marxist. The underlying motivation is more likely that households forced to self-insure stay precarious and pliable.
A grinding property crisis has only heightened the sense of vulnerability. Chinese households hold about 47% of their assets in real estate, and prices have fallen roughly a fifth from their 2021 peak, erasing trillions of yuan in wealth. Because a family’s home is often their only form of insurance, the loss of value has made people cling to cash all the more.
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Beijing has promised for years to rebalance the economy toward household consumption, so as to reduce the country’s reliance on the twin growth engines of exports and investment. Yet after two decades of jawboning and half measures, consumption is stuck at about 40% of GDP, compared with 55% to 70% across the rich world. Households save at extraordinary rates — deposits have roughly doubled since 2019, to some 165 trillion yuan ($24.7 trillion) — not from thrift but because the Chinese state offers thin retirement pensions, patchy healthcare coverage and unemployment insurance that reaches barely a third of the workforce. Jobless benefits are pegged to the local minimum wage — not to what a worker earned — and is capped at 90% of that: roughly 2,000 yuan a month. This year the minimum rural pension has increased by just 20 yuan, to 163 yuan a month. A people who cannot count on the government to care for them when they are ill, jobless or old will not spend.
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Youth unemployment tells the same story. The rate for 16- to 24-year-olds who are not in school now stands at 18% — an indicator so politically sensitive that Beijing suspended its publication in 2023, and then revised the methodology. A generation that coined the term neijuan, “involution,” shorthand for running ever faster to stay in place, is not the confident spending cohort a middle class is built on.
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The artificial intelligence boom deepens the divide between the government’s industrial ambitions and household welfare. Beijing is pouring trillions of yuan into the development of more advanced chips and data centers to support AI, and that spending is, for now, what is powering growth. But it funds those technology investments by** starving the basics: hospitals, schools and other elements of the already meager safety net in rural areas**, while the rewards accrue to the coastal, educated sliver.
The resulting inequality would look familiar to any American. With the poor and middle held down, one group has been allowed to grow: the rich. China’s richest 10% of the population hold about 68% of its national wealth, close to the US figure of 70%. In 2025 the 1,434 individuals worth at least 5 billion yuan saw their combined wealth soar 42% thanks to a powerful stock market rally, according to an annual list compiled by the Hurun Research Institute, a Shanghai-based firm that has tracked China’s rich since 1999.
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Common prosperity, Xi’s supposed sequel to Deng’s “let some get rich first,” is turning out to mean shared restraint, not shared wealth: billionaires disciplined when convenient, the middle class asset-trapped, the poor pacified in 20-yuan increments. Everyone, in the end, is held equally in check.
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During 14 years in power, [Xi Jinping] has chosen control over household welfare at every turn, and for the fourth presidential term he’s expected to claim in 2027, there’s no reason to expect a change of course. So the likeliest path is welfare that grows but stays minimal and conditional: enough to keep the peace, and calibrated to sustain dependence rather than end it.
The West wagered in 2001 [when China entered the WTO] that trade would make China rich and wealth would make it liberal. It got the first half. Whether a great power can hold the rest together while keeping most of its citizens poor is, at best, a formula for grinding stagnation — at worst, a slow-burning fuse.
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