Thursday, 25 October 2012

China is neither super slowing nor super cars…..

Having spent last week visiting clients and intermediaries in Beijing and outlying Provinces, it was interesting to see first hand whether the hackneyed Western views of China as being a nation of super slowdown coupled with conspicuous car consumption really hold true.

Whilst the economic statistics are presumably flawless, little account is taken of the actual base line from which the recent super growth began.
Leaving Beijing for Shandong province, I was lucky enough to visit two factories designed and built to execute an identical manufacturing process, the only difference being the build dates - 2001 and 2011 respectively.

I began my advisory career with Price Waterhouse, touring scores of factories, and thus feel reasonably qualified to date the design, processes, and controls of the 2001 factory as being the Western equivalent of immediate post war build - i.e. the early 1950s. This arose presumably through a lack of access at that time to Western technology and advice.

The same Company has built a replacement factory, which has doubled the previous capacity of the factory, and filled it with state of the art equipment and technology. Apart from drastic improvements to the working environment, the productivity shift is exponential.

Arches to rival the world in downtown Beijing
So in exactly ten years, this Shandong business has advanced seventy years in technology and efficiency. Extrapolating that principal to the macro economy, the super growth that we have all witnessed in China over the past few years is understandable.

It is unreasonable however to expect that growth rate to continue because the maths simply does not work; 10 years from now the technology cannot possibly be a further 80 years ahead!

Experienced advisers on China growth often use the analogy of dog years, whereby your favourite hound packs into each year of its short lifespan seven more years than we mortal humans do. This multiple is uncannily close to the Shandong example.

So expect a slow down relative to the previous base lines, but the forward pace will still be far faster than what Europe can even dream of at present. Anyone waiting for the big economic fall of China may end up with only statistics for comfort and find themselves in very much the wrong market!

Supercars few and far between
As for the super cars? In six days of moving to and fro across Beijing from Chaoyang in the East to Xicheng in the West, the best offerings of glamour cars were Range Rovers and Audis - hardly super car league. A daily 15 minute drive to the City of London each day always yields a good mixed dozen of Astons, Ferraris and the odd Lamborghini, so voyeuristic petrol heads need not head East from London just yet!

Julian Bosdet

Follow us on Twitter @AbchurchComms

No comments:

Post a Comment