A couple of China features in the FT yesterday really got me thinking.
With a population of 1.4bn and rapidly growing, China is now the world's biggest exporter and second biggest importer (after the USA). It is the global trader we are all watching because it can tip the balance in so many ways - currency flow, political power, agricultural commodities, value-added goods.
It's the value-added goods that have interested me this week. As the country's affluence grows (mainly the 300 million in the south east of China) their demand for western value-added goods will grow. It is already doing so and the car market is a good case in point.
There 70million family cars in China (4-5% of the population owns them), car production in China has gone up from 5,000 (yes 5 thousand) cars 30 years ago to 11million last year. These stats compare with 70% car ownership in the USA - so car ownership equivalent of 220million in a total US population of 300million. China anticipates the saturation point of car ownership is 200million. That is a huge leap in manufacturing and, importantly raw material and oil consumption.
Spin the story out further still into economics and social factors. There is a big social factor to China's car ownership aspirations... they see cars as an extension of their personality in a state which encourages unifomity in all the citizens to/say. People pimp their rides big time (huge market for car accessories) they also use cars for scoail interaction (massive uptake of car club joining, racing etc.) Would you beleive one of the accessory manufacturers is also developing prosthetic limbs to replace those lost in car accidents by over exuberant young drivers... I just couln't believe this when I read it.
The other point I mentioned was economics - the Chinese market is so important to global manufaturers, their wants and tastes are influencing manufacturing - and not just for utility vehicles/4x4s which are so popular, also for the premium cars. Last year Mercedes Benz flew groups of 100 Chinese customers to Germany and LA to give feedback on the features they wanted for luxury cars. China is the third largets market for Mercedes after Germany and the USA (their sales rose by 115% last year in China). The sort of thing the Chinese customers want are reclining seats in the back of the car, the ability to log on to the internet from the reclining seat in the back of the car. BMW is seeing similar trends 39% of its Q4 operating profits were from China.
So we anticipate China to have a real impact on the commodity markets, global politics and currency... but their influence and spend on value-added goods will be massive, and given that we do 'value-added' so well, there is huge opportunity begging in this massive beast of a country.