China's struggling middle class deserves better

CHINESE stock markets are reeling from instability. "Circuit breakers" halted trading activity after steep losses, angering investors and embarrassing government regulators. Jilted traders played cards in public trading halls while anxiety swirled in global markets. In a country where the two major stock exchanges are less than 30 years old, volatility is no surprise. However, it raises deeper concerns about the mobility of China's middle-class investors and their role in the country's longer-term development.

Since the mid-20th century, the developing world has watched Western households build their wealth through property and stocks. China's economic growth is now enabling new generations of consumers to do the same. However, their investment options are comparably less attractive. The Chinese stock market is immature by Western standards and suffers from a lack of policy clarity, while uncertainty about property rights and market instability has sent Chinese housing investors scurrying to foreign markets. The path to middle-class wealth is proving to be more global (and treacherous) in China than it once was in the United States.

Both countries have progressed through the standard stages of national development. America's post-industrial economic story has even been applied to similar predictions about China. This comparison is particularly tempting with growth in higher-value-added industries and the development of a middle class - often seen as a building block of any country's domestic economic stability. However, there are important differences. What once made the American middle class financially stable - independently functioning markets and institutional stability - seems absent in China.