Apple and the Chinese Middle Class

I'm typing this blog entry on my iPad, which in two short months has become indispensable to me. I am not alone. as the New York times reported yesterday:

Apple said it sold 35.1 million iPhones in the quarter, an 88 percent increase from the period a year ago. It sold 11.8 million iPads, more than double the number it sold in the same quarter last year.

The article explained that Apple tends to underestimate its earnings projections, which makes the actual numbers even more dramatic and impressive. What is even more impressive is how well Apple is doing in China, according to CEO Tim Cook:

Mr. Cook said that Apple's quarterly revenue from China was $7.9 billion, about 20 percent of total company revenue. Furthermore, that was triple Apple's China sales in the same period a year ago. In contrast, Apple's China sales during its last fiscal year were about 12 percent of total revenue. Two years ago, Apple sales in China were 2 percent.

"China has grown from a rounding error to a massive new market," said Robert Cihra, an analyst at Evercore Partners. "Their premium price point clearly has not been any hurdle to them growing there."

Mr. Cook said that enormous numbers of people moving into the middle class in china were creating demand for goods including the iPhone. He said Apple was "doing everything" it could to serve the market. The iPhone 4S went on sale in China on Jan. 13, near the beginning of the last quarter, and starts at nearly $800 without a wireless plan, though it is available free with a multiyear carrier contract.

I decided to learn more about China's new middle class and happened upon an article that Tami Luhby had written yesterday for CNN Money. Ms. Luhby interviewed Helen Wang, author of The Chinese Dream: The Rise of the World's Largest Middle Class and What it Means to You. This is how Ms. Luhby defines the Chinese middle class:

I define middle class as households with an annual income of between $10,000 and $60,000 U.S. dollars. But income is a little misleading because the cost of living in China is very different. A rule of thumb is a household with a third of its income for discretionary spending is considered middle class.

Why is the Chinese middle class growing so quickly? Here's one explanation:

A lot of it is entrepreneurship. with China's economy growing over the last 20 to 30 years, there have been a lot of business opportunities. Some people still go to college and then get good jobs. a lot of multinationals employ these young college graduates. They pay relatively better than Chinese companies. Many foreign companies are contributing to creating the white-collar middle class. Chines state companies also employ a lot of people. Their income has more than tripled over the last 10 or 15 years.

I'm happy to hear good news. This is good news not only for Apple and the Chinese middle class, but for U.S. exports as well.