You may not realize this, but most people, in China, do not have a car.  Indeed, I have met few people who have cars, and most of the ones who I have met have a van to use as a gypsy cab for long or short hauls.  In fact, most people have never even learned to drive a car. 

When I was growing up (even way back then), in the backwoods of Pennsylvania, we had to take driver's ed, in high school, and we all had licenses by the time we were 16.  Even as a relatively poor kid, I bought myself a car by the time I was 16.  When I tell people, here in China, they think that that is so incredible.  To me it seems so common for every 16 year old kid to be able to drive and probably have a car, and I was young a long time ago.

The basic reason is that with the mispricing of the Yuan against major foreign currencies.  To bring you up to speed (see "You're Missing the Point", a free download on our website on the In Country Analysis Page), 10 Yuan can buy me a nice dinner, in China.  Y3,000 pays rent on a great apartment, in Guangzhou, a major city.  Salary for the guards and doormen, in our luxury apartment complex, is around Y800/month.  Kids getting an accounting degree from the foreign university where I teach econ and finance, in Guangzhou, are tickled pink, if they get a starting salary of Y3,000/month.  So, even Y50,000 in salary per year can give you a lot of local purchasing power. 

Since most automobiles (and mostly what people, here, want) are imported, they have to suffer the flip side of a cheap Yuan.  In addition, there are high import fees on the imported goods that I have encountered.  Thus, even a relatively cheap car can cost several hundred thousand Yuan, which a relatively large price compared to average income.  Indeed, Hondas from Japan (anyone who buys one made at the Honda plant in Guangdong Province is just a wannabe) are actually prized and used to show off how rich someone is: where I come from, only mostly kids  would drive a little Honda.  To give it a little more perspective: my niece, back in Pennsylvania, for example, just bought a historic building in a small college town for around $100,000.  She is a graphic artist, so she even makes relatively more money than the average person,, here, but the expense is even smaller, relative, for her [on the basis that one Yuan, in China, has about the same local buying power as one dollar, in America] than the car purchase expense, relative, in China.  In the countryside, though, you do see a lot of motorcycles, sometimes one will carry a family of five.  Then, there are motorcycles with two wheels on the back with a cart for either people or goods transport.  There is also another smaller utility vehicles that is part motorcycle and part truck.  In Guangzhou, motorcycles were banned recently because there are more and more cars (only difficult to get a taxi when it rains).



The Transportation Sector, including infrastructure, is always an important one, in a developing economy.  In the U.S., we had trains coast-to-coast, in the 1800's.  When I was little, buses were a very big thing, but by the time I went to college, the major bus lines had merged, and buses were relatively scarce, either in their schedules, their available terminals or where they went.  In China, right now, there is huge availability of public transportation.  I teach at a college, 45 minutes outside of Guangzhou.  I usually take a private car because, for me, it costs around $15 [sometimes, in China, I think in terns of $, but most of the time I think in Yuan], but if I get a bus the mile down to the major thoroughfare (3 or 4 buses pass by plus many motorcycle taxis), I only have to wait at the thoroughfare for about 2 minutes for a bus because there are about 10 different buses that pass by and will be going to Guangzhou.  If I want to take a train to Shenzhen, the major mainland city next door to Hong Kong, they run every half hour.

I ha d friend, for example, whose uncle had a small trucking line, having started out with a single rig.  He has recently switched to excavation equipment because of the ongoing building of infrastructure.  Indeed the 3 lane highway between the school and Guangzhou is being replace by a 6 lane superhighway; the underground subway system, in Guangzhou is being expanded with new lines running through the city and further into the environs; seven-story-high raised highways run through the city, in several layers of rings.

Thus, a good area for investment in China for the future is transportation related.  Car dealerships; driving schools; and toll highway companies, to name a few, will be good areas for longer term growth as the Yuan gets revalued, as barriers to imports are lowered, and as all those beautiful and varied foreign cars come into China into showrooms and onto the highway.

You can read more about real life, in today's China on our In Country Tips Page.  You can read more about our thoughts on business, investment and the economy, in China, on our In Country Analysis Page.