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Challenges ahead for China's middle class
China correspondent Huey Fern Tay reports.

Chinese President Xi Jinping's inaugural speech focused on people achieving what he termed as the "China dream". The country's middle class is seen as fundamental to China's economic wellbeing, but the road ahead may be tough.
Transcript
JIM MIDDLETON, PRESENTER: When Xi Jinping delivered his inaugural speech as president he exhorted the people to achieve what he termed the 'China dream'.

This idea has since been interpreted in many ways: from China's growing military might to the standard of living the country's growing middle class can attain.

So just how tough is the road ahead for a section of society fundamental to China's future economic wellbeing?

Huey Fern Tay again.

(Footage of chefs at work in the kitchen)

HUEY FERN TAY, REPORTER: For the past four years this restaurant in the heart of Beijing has been dishing out Turkish food in this part of town where there's a concentration of expats and foreign companies.

Workers here are paid between 3,000 to 4,000 yuan a month, which is the industry norm nowadays. That's between $450 to $600 - at least 50 per cent higher than last year. The restaurant owner has to do that to retain staff because workers are becoming harder to come by.

NING CUNPING, RESTAURANT OWNER (translation): Nowadays when you hire someone you have to pay for their accommodation, three meals a day and other things on top of their monthly salary. The costs are pretty high.

HUEY FERN TAY: Life has also become a lot more stressful for Mrs Ning because business has been particularly slow as the chain of restaurants here feel the delayed effects of the global economic downturn.

Mrs Ning's local supplier of halal meat also keeps increasing the price of his produce.

She describes the rate of which costs have gone up as being unbelievable.

NING CUNPING (translation): We dare not raise the prices of our dishes, even though our costs keep going up, because the market isn't very good at the moment. So that's why, even though I'm earning less and life is a bit harder, I dare not raise prices because I'm worried customers will stop coming.

HUEY FERN TAY: China's middle class only make up 6 per cent of the urban population. The official goal is to boost this proportion by doubling the average income by the year 2020.

But the future looks tough for this section of society. Business owners, like Mrs Ning, are being squeezed in today's China; a country that's in the midst of reform as it works to move its people up the value chain amidst a shrinking labour pool.

And according to economists like Zeng Xiangquan things can only become tougher because wages are still low around the country.

ZENG ZIANGQUAN, RENMIN UNIVERSITY (translation): So the purpose behind the wage hike is to raise the nominal wage so we can maintain our purchasing power, and in fact we need to increase our wages even more.

HUEY FERN TAY: What about if you have a new entrant to the middle class, a young white collar professional? Being in a city like Beijing presents lots of opportunities but you're probably won't get much of a pay rise if you change jobs because of the glut of fresh graduates. Apartment rentals keep going up too, sometimes by as much as 40 per cent in two years, and bank savings are being eroded by inflation.

Apart from that, leading a middle class life can be expensive in China since things like coffee from Starbucks, imported cars or electronic goods cost more here than in Hong Kong or the US.

There are endless temptations to tap into the human desire for a better and higher quality of life. Twenty-seven year old recruitment consultant, Nora Namat, is a marketer's dream.

NORA NAMAT, RECRUITMENT CONSULTANT: The differences, for example, three years ago I thought if I can make certain amount of money, maybe I can I mean, be more relaxed when I spend money, but it's not like that. Your income increase and your standards also increase.

HUEY FERN TAY: Home ownership is far from Nora's thoughts at the moment, but for many others here, especially would be couples, it is troubling. The truth is that properties remain expensive and out of reach for most Chinese. And that's the reality of being middle class right now.
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