The Fall In Apple”s Share Price And China’s “Middle Classes”

Business, China, Company Strategy, Economics, Technology


By John Richardson

SOMETHIING very important happened last week when investors wiped $30 billion off the value of Apple’s shares in the space of just one day, even though it had just delivered another excellent set of quarterly results.

According to the Financial Times, the reason for the slump in the value of Apple, however temporary, was down to this:

The fluctuations of the Chinese stock market have raised questions over the spending power of its middle class, who are driving the iPhone’s popularity in Apple’s second-largest market.

Tim Cook, Apple’s CEO, was absolutely right when he said that the recent collapse in China’s stock markets were not in themselves that much of an issue for the spending power of the country’s middle classes, as only a “narrow slice” of the country’s population gamble in equities.

But I actually think that the underlying reason why investors took fright was another example of what I first talked about earlier this month: The growing realisation that there are no “magic pill” solutions to the country’s economic problems, which has been prompted by the decline in China’s equities,

The next phase will be when the consensus view shifts to understanding that this is what it really means to be middle class in China, based on data from China’s National Bureau of Statistics:

•High Income groups in urban areas had $9,000 income in 2013, versus $4,000 in 2007. Great progress, but, of course, this is a long, long way from being middle class by Western standards.

•The Middle Income group in urban areas had $4,000 in 2013 versus $1,600 in 2007, and the Low Income group had $1,900 versus $700.

•And the High Income group in rural areas had just $3,500 income in 2013 versus $1,300 in 2007.

•The rural Middle income in rural areas had only $1,300 in 2013 versus $500 in 2007, and the Low Income had only $400 versus $180.

The problem for companies that sell to China in general is that for far too long, this kind of data was ignored in all the excitement created by the 2009-2013 economic stimulus package. Too many people thought that China had suddenly become a Western-style middle class country, virtually overnight, when the reality was that the “wealth effect” created by that stimulus package was never sustainable.

Where do we go from here?

I actually think that whilst the sales growth of Apple iPhone will likely further decline in China, they will be OK as there will always be enough rich people in China and elsewhere who can afford to buy all of their products.

The bigger risk is for ‘mid-market” overseas smartphone producers that lack Apple’s brand appeal. They will suffer very badly from cheaper Chinese alternatives, such as Huawei and Xiaomi.

The parallels for the chemicals industry are obvious here. You either provide high-end solutions or very, very cheap chemicals and polymers. But what you must not do is be caught in the no-man’s land of the middle ground.


China And Commodities Prices: The Slow-Motion Train-Wreck


By John Richardson OIL prices are now in bear-market territory with commodities ...

Learn more

China PP Production Up 23% As Self-Sufficiency Drive Continues


By John Richardson THE above chart provides further support for the argument I h...

Learn more
More posts
Polyethylene demand boom should not obscure focus on major changes in industry fundamentals

By John Richardson IT WASN’T supposed to be like this. We firstly had the unprecedented increases ...

Sustainability, the pandemic, demographics and geopolitics – how petchem companies respond will define their success

Just to stress again that this blog represents my personal views and not those if ICIS. By John Rich...

Exporters of PP and SM to China seem to have options other than shutdowns, but not PX exporters

By John Richardson DIFFICULT choices lie ahead for exporters of polypropylene (PP), styrene monomer ...

China polyethylene and ethlyene glycols in 2021: country-by-country outlook for exporters

By John Richardson CHINA’S polyethylene (PE) imports could be at either 19.8m tonnes in 2021 or 16...

China’s PE imports in 2021 could be as high as 19.8m tonnes or as low as 16.8m tonnes

By John Richardson IN SCENARIO 3 in the above chart, China would import 16.8m tonnes of polyethylene...

China may next year import 66% less PP from South Korea than in 2020, 72% less styrene from Saudi Arabia

By John Richardson All the numbers that follow are my estimates only and are not the official ICIS n...

China’s planned economy boosts global petchems this year but poses a self-sufficiency threat in 2021

By John Richardson IT IS always useful to develop a good plan and then effectively implement the pla...

Why history, culture and politics will give you the petrochemicals answers you need

By John Richardson ALBERT EINSTEIN knew a thing or two about data, including searching for entirely ...


Market Intelligence

ICIS provides market intelligence that help businesses in the energy, petrochemical and fertilizer industries.

Learn more


Across the globe, ICIS consultants provide detailed analysis and forecasting for the petrochemical, energy and fertilizer markets.

Learn more

Specialist Services

Find out more about how our specialist consulting services, events, conferences and training courses can help your teams.

Learn more

ICIS Insight

From our news service to our thought-leadership content, ICIS experts bring you the latest news and insight, when you need it.

Learn more