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Premier Li reflects hopes of China's 109 million middle class

03/06/2017| 2:50:49 PM|

Chinese Premier Li Keqiang highlighted government efforts to help boost people's wealth through productive work during his speech to the annual meeting of the National People's Congress on March 5.

Premier Li may have been reflecting the financial aspirations and hopes of the nation's 109-million middle class. The country's personal per capita disposable income grew by 6.3% in real terms in 2016, Mr. Li said.

The middle class-people with net assets worth between USD 50,000-500,000 each-have been groping for high-return options that increasingly appear to be few and far between, due to changing economic growth trend, stricter regulations and fluctuating currency.

Over the past decade, China's GDP grew from RMB 21.9 trillion in 2006 to RMB 74.4 trillion in 2016, a growth record, with this year's GDP forecast to grow at 6.5%. The yuan appreciated from 7.8 per dollar at 2006-end to 6.96 at 2016-end. This led to a steady rise in people's income and family wealth.

China ranks third after the United States and Japan in terms of household wealth, according to the 2016 Global Wealth Reportby Credit Suisse. Even as GDP growth slows, in the next five years, China's wealth will likely remain on a strong upward trajectory, growing at 9.2% annually, to reach USD 36 trillion in 2021, the report said.

The consequent massive demand for financial products and professional wealth management services has not been matched by adequate supply. This meant stocks and property remained key investment avenues for long. 

"The CPI (Consumer Price Index) is around 2% for 2016 (and forecast to be 3% for 2017), which means inflation is not an immediate concern. But every family can get a sense of it when they compare the rise in their income with the rise in housing prices, food prices and their children's education costs," said Thomas Deng, chief investment officer for China at UBS Wealth Management.

Despite recent tighter controls on capital outflows, some of Chinese families' money could well reach overseas investment markets as investors continue to diversify risks, said Deng of UBS.

While the greenback is facing short-term correction pressure, its purchasing power will continue to be strong; so, holding dollar-denominated assets will make eminent sense for investors, he said.

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TAGS: middle class | NPC | Premier Li Keqiang
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