Globalization of the American Dream:  "China's Car Economy Revs Up"

I learned that China is the world's largest car market in the world -- automobile sales are up 46% with the central government building 30,000 miles of expressway in the past decade.  It seems that China is following in America's footsteps, as our US Interstate Highway System once upon a time sparked our own economy by "lowering distribution costs, increasing manufacturing employment and boosting productivity."  The huge increase in mobility has lead to some interesting 'downstream' effects -->  currently McDonald's Corporation has 105 drive throughs in China and is planning to build 300 more over the next 3 years, tourism is up 33% with hotel occupancy alone up 21% in the first half from a year ago.  InterContinental Hotels Group PLC plans to double the number of hotels in China in the next five years.  Commercial radio advertising is rising as more Chinese spend longer amounts of time in their vehicles.  Even bulk consumer goods are increasing in popularity as people have the ability to transport a 12 pack of soda home rather than buying 1 or 2 bottles at a time.

There is some concern however about overcapacity in this industry as warned by a senior official at China's National Development and Reform Commission.  Behind this concern is the government's approach to growth -- the economic structure gives incentives to local subsidiaries to  produce capacity, in an effort to create growth but sometimes without regard to demand.  However, industry analysts point out that "For at least the last ten years there have been dire warnings about overcapacity...each time, Chinese consumers have made the warnings look foolish."  Only time will tell!


Sources:


Burkitt, L.  "China's Car Economy Revs Up"  Wall Street Journal, October 7, 2010.


Shirouzu, N.  "Is China Building Too Many Cars?"  Wall Street Journal, October 7, 2010.