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Rapid Growth and the Middle Class in China

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Mega-apartment buildings are being built in the Shanghai area. Image by Rodney White. China, 2014.

SHANGHAI – As we drove through the Shanghai suburbs, we passed symbols of conspicuous consumption everywhere: a giant Ikea store, mile after mile of new high-rise apartments, Land Rovers and Mercedes-Benzes, and billboards featuring Western stars such as Benedict Cumberbatch shilling for Dunlop tires.

We drove past Wuxi, a city in Jiangsu province near the Yangtze River west of Shanghai. Monday's edition of China Daily, an English language newspaper, highlighted Wuxi as a possible "vision of China's future."

In its next five-year plan, the Chinese government is expected to set a goal of becoming a high-income country by 2020 and doubling per capita national income. China wants to avoid the "middle-income trap" that has snared other developing nations who still have large populations in poverty.

Wuxi was one of China's first manufacturing hubs, but it has now diversified its economy to attract Internet-related businesses, medical research and film studios, the paper reported. Its per capita gross income is $20,400, nearly four times China's national average of $5,720.

Here's some perspective: Iowa's per capita income was $41,156 in 2011, and Polk County's is $45,336, according to state data.

Our hosts on our drive asked us many questions about the cost of living in America. "Is it easy for you to save for a house?" they asked.

They complained about high costs for housing and gave this example: A 1,150-square-foot apartment in Tianjin, a major city near Beijing, costs more than $200,000. Property rates are much higher in Beijing and Shanghai, even though prices are falling and spurring fears of a real estate bust.

As we discovered on our road trip, other prices are higher in China. Gasoline is the equivalent of about $4.50 a gallon. We paid almost $21 at one toll booth.

Leo Luo, a production manager for Des Moines-based Kemin Industries in China, can afford an apartment for his family, but he feels the cost pressures. "I worry about my son," he said. When the 2-year-old grows up and marries, Luo will be responsible for making a down payment on his "wedding house," as per tradition.