They are in the frontline of the trade war with the United States, caught in the suppressing crossfire. But so far, China’s 250 million middle class has proved resilient to successive rounds of tit-for-tat tariffs.

For many, the clear and present danger comes from the fallout of this new economic Cold War, which has wiped nearly $3 trillion from the Shanghai Composite Index in the past six months.

There have also been concerns that the property bubble in what are called tier one cities, such as Beijing, Shanghai, Guangzhou and Shenzhen, is poised to pop.

“The trade war between Washington and Beijing has been analyzed largely through the lens of state-to-state relations,” Cheng Li, a director and a senior fellow in the John L. Thornton China Center at the Brookings Institution, said.

“But any attempt to fully assess how the dispute will affect China’s domestic development and foreign engagement must take into account the country’s dynamic middle class, which has suffered the brunt of the ill effects from the trade war,” he added.

Moreover, this crucial demographic group managed to weather the 2015 stock market tsunami, which washed away $5 trillion in a massive sell-off, as well as stalling property prices.

‘Drastic showdown’

Buffeted, they bounced back, despite the economy growing at its slowest pace in 25 years.

“Notwithstanding the recent equity market turmoil, there are no signs of a more drastic slowdown,” Louis Kuijs, the head of Asia economics at Oxford Economics, said in 2015.

Fast forward three years, and this looks like another deja vu moment.

Houses prices are wobbling and the stock markets in Shanghai and Shenzhen resemble a train crash.

Official data has also shown that demand for new property is slowing in 70 major cities. Anecdotal evidence appears to back that up.

In eastern Jiangxi province during the Golden Week holiday, angry new homeowners demonstrated outside a real estate office in Shangrao after paying full-price for apartments which were being discounted by up to 30%. A similar incident took place in Shanghai, according to the Chinese media.

“Property accounts for roughly 70% of urban Chinese families’ total assets – a home is both wealth and status,” Shao Yu, the chief economist at Oriental Securities, an investment bank based in Shanghai, said. “People don’t want prices to increase too fast, but they don’t want them to fall too quickly either.”

Still, gauging the mood of China’s middle class has become a serious social science for President Xi Jinping’s administration. Keeping the country’s nouveau riche happy is crucial when mapping out policy.

By 2020, 75% of urban consumers will earn between 60,000 yuan ($9,037) and 229,000 ($34,495) annually, a report by McKinsey & Company, the global management consulting firm, highlighted.

In hard numbers, that is nearly 400 million people. At least 54% will also be classified as “upper middle class,” with an annual income of between 106,000 yuan and 229,000 yuan.

‘Urban rich’

Indeed, Beijing is banking on the “urban rich” as the central government continues to realign the economy from export-fueled to consumption-led growth.

Yet the immediate outlook is shrouded in uncertainty.

“China’s stock markets have plummeted about 24% from January highs [with Shanghai and Shenzhen down by nearly 3% on Thursday], and the Chinese yuan has fallen about 10% against the US dollar since the [President Donald] Trump administration first announced China-directed tariffs in early April,” Li, of the Brookings Institution, said.

“Fears that a potential bubble in the property market could burst have spread from major metropolises into second- and third-tier cities. A financial technocrat in Beijing neatly captured the tension by saying that the property market hung like ‘the sword of Damocles over the Chinese financial system,’ he continued.

“Economic pressure from the trade war is only the latest factor driving unease within the Chinese middle class. In recent years, a slowing economy, coupled with systemic issues such as official corruption, environmental degradation, food and drug safety scandals, and tightening political and ideological control, has sparked complaints and heightened criticism,” Li added.

In the end, how long China’s middle class can dodge these fiscal and political bullets will be the deciding factor in shaping the world’s second-largest economy in the next decade. And the trade war.