A blue-collar wave is rising in China -- and buoying Xi Jinping.
In most countries, a slowing economy and a sinking stock market would put some heat on politicians. Not in China. A working class that numbers more than 400 million has President Xi's back.
Under his presidency, China's economic policies are favouring workers more than at any other time in recent decades. One doesn't need to look far for evidence. Since 2015, the People's Bank of China (PBOC) has showered 3.3 trillion yuan (15.7 billion baht) of helicopter money on shanty-town redevelopments. As much as 60% of that money went as cash settlements to poorer households.
By now, loans to policy banks for shanty-town projects have ballooned to two-thirds the size of the PBOC's medium-term lending facilities, its primary vehicle for injecting liquidity into the broader economy.
Flush with handouts, the first thing China's working class did was to improve their housing situation. Last year, government cash payouts accounted for 23% of property sales by value in tier 3 to 5 cities (the smallest and least affluent), Nomura Research estimates.
As of 2017, about 115 million migrants were working in tier 1 to 3 cities, almost all of whom had residency rights only in their rural home towns and villages. Adding the 318 million people who live in tier 4 to 5 cities, the number eligible for helicopter money is at least 430 million strong. That is Mr Xi's core constituency.
Blue-collar employees barely notice the stock market slump. Only 7% have invested in stocks and 12% in bank-issued wealth management products, compared with 35% and 47% of middle-class consumers, according to a survey by CLSA Ltd. But 90% of workers own their own homes. As long as property prices continue to hold up, Mr Xi's fans won't feel their wealth is being eroded.
Meanwhile, working-class incomes are rising much faster than those of the middle class. Household income of migrant workers in the biggest cities and local residents of smaller cities has exceeded 10,000 yuan per month, half the total for the middle class, according to the CLSA survey. Income growth for workers is running at 10% per year.
Instead of being a white-collar worker in Beijing or Shanghai, you can make as much delivering packages for Alibaba Group Holding or lunch boxes for Meituan Dianping. To fight pollution and traffic jams, mega-cities in China have started to cap population growth and even kicked out some migrant workers. As a result, the blue-collar labour market has become tight.
Meanwhile, the cost of living is soaring in China's biggest cities. Take Shanghai, for example. In October, average home prices climbed by 30% from a year earlier to 63,618 yuan per square metre, according to David Hong, head of research at property consulting firm CRIC.
A 100-square-metre apartment (slightly smaller than the average in Shanghai) would cost 6.4 million yuan. Given the standard 35% down payment and a 30-year fixed mortgage at 4.6%, a household would face more than 21,000 yuan in monthly loan payments -- exceeding the entire monthly income of an average family.
Migrant workers in big cities don't feel so much living pressure. Because of the rural residency permits, their children aren't eligible to attend school in the city anyway. As a result, many migrant workers live in cheap shoe-box apartments on weekdays and commute to satellite towns to see their families on the weekend.
Most workers surveyed by CLSA said they would prefer to work and live in tier-2 cities eventually.
All eyes are on the G-20 summit in Buenos Aires this week, where Mr Xi and US President Donald Trump will meet. Those hoping China's president will cave in to Mr Trump's demands and seek a quick trade deal to relieve the economic pressure are likely to be disappointed.
When it comes to the masses, Mr Xi's as popular as ever. - BLOOMBERG OPINION
Shuli Ren is a Bloomberg Opinion columnist covering Asian markets.