The second China Structural Development Monitor (CSDM), a joint initiative on the part of pension administrator and investment manager Mn Services and the Europe China Institute of Nyenrode Business Universiteit, contains a number of surprises. Particularly notable is the fact that the Chinese middle class no longer expects the Chinese currency to continue appreciating heavily over the next five years, whereas just a quarter ago this was still regarded as a major threat.
In doing so the Chinese middle class ignores the call in the West for the appreciation of the currency. The question is however whether China in the longer term will be genuinely better off sticking to this policy, if in doing so it risks isolation from the (Western) world and maintains an unduly one-sided growth model. The CSDM shows in any event that from a Chinese viewpoint, the West attaches too much importance to the threat by the United States to label China as a currency manipulator, says Anne-Marie Munnik, head of strategy and research at Mn Services.
Last year Mn Services set up a recurrent panel survey in China, the China Structural Development Monitor, together with the Europe China Institute. This qualitative survey identifies Chinese socio-political and economic trends and the investment climate in China in the medium term. A fixed panel, drawn from the rapidly growing middle class in China, provides the unique basis for this qualitative monitor. The opinions of the panel provide unique insights from China, as reflected in the CSDM index.
The first CSDM, published in December 2009, provided an optimistic picture, even though China was also hit by the economic crisis. On balance the Chinese middle class expressed optimism about the medium term, in terms of both the overall situation and their personal circumstances. The second CSDM now shows that the optimism of the Chinese middle class has declined somewhat, and this precisely at a time when the world is looking at the growth in China with amazement and admiration. In particular, people have become more pessimistic about the development of the Chinese social security system and the associated personal costs of pensions, education and health care.
In relation to the previous quarter, there has been a notable rise in optimism about the Chinese currency: a sharp rise in the renminbi is no longer seen as a risk.
D.C.