Kenichi Ohmae, a Japanese business and corporate strategist, wrote in his book M-Shaped Society: The Crisis and Opportunity of the Disappearing Middle Class, "In a well-developed society, the middle class forms the bulk of society. However, in Japan, the middle class is rapidly disappearing, forming an 'M-shaped society.'" Ohmae uses the M-shape to describe a polarized society of the extreme rich and extreme poor.

"In China, the situation is more complicated," said Jiang Lei, the Chinese version editor of Ohmae's book, to China Newsweek. "It seems that the Chinese middle class is gone before it formed and developed."

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In China, it is very hard for people in the middle class to climb the social ladder and squeeze into the upper class. A large number of them will sink into the lower classes. The middle class is gradually disappearing.

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In 2007, excited about China's developing 3G industry, Li Xiang returned to Beijing to start his own mobile service company with a friend. He had just earned his M.B.A. in the United States after working at IBM for six years, where he had been promoted to a mid-level executive. He owned a car, some real estate and his own small business, but Li scoffs at the idea of being considered middle class.

"I am a middle class?" Li said with a bitter snort. "I am nearly bankrupt."

Li thinks if China did have a middle class, it is probably very small and those people are in a tight spot with little room for promotion.

Li kept his business expenses to a bare minimum, buying secondhand or domestic equipment where possible, and would spend only 15 yuan on lunch every day. He worked overtime on weekends, but his company still couldn't turn a profit. He had to lay off several employees, who are now suing him.

Embroiled in the lawsuit and trying to find new investors, Li regrets the road he chose. "It is unbelievably hard to start or run a medium-sized or small business in China," he said. "If I had known this, I would have invested in the real estate industry and never have tried to start my own business."

If his business fails, Li said, he would go to the United States and become a professional manager. "Maybe then I can be considered middle class," he said.