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Why China's Middle Class Can't Flex Its Buying Power

The new city dwellers created by China's massive urbanization drive have yet to spark a consumer-spending boom
Women take smartphone photos on Qianmen Street in Beijing.

Women take smartphone photos on Qianmen Street in Beijing.

Photographer: Tomohiro Ohsumi

China isn't importing things the way it used to. January imports plunged about about 20 percent in dollar terms from a year ago, caused in part by falling commodity prices—China is a big buyer—and the drag of a slowing economy on corporate spending. China's exports weren’t pretty either, having fallen 3.3 percent last month. “Domestic demand in China remains very weak, especially in the two most important types of imports: raw commodities and capital goods,” wrote Louis Kuijs, chief China economist at Royal Bank of Scotland, earlier this week.

A new report suggests that a deeper problem lies ahead for multinational companies betting on China sales to drive global growth: The buying power of China’s middle class is not expanding as quickly as many anticipated. That’s pulling down overall per capita consumption growth, which dropped from 8.5 percent in 2009 to today's 7.1 percent. The trend is likely to continue.