Greece is a country with a population of less than 60% of the population of Shanghai and not even one percent of the whole of China. Yet problems in this European country are causing significant ramifications for the China and the rest of the world.
The Eurozone’s seeming inability to address debt and associated growth issues is beginning to cause concern in China. Japan is only slowly recovering from the Tsunami impact, the German and US PMI are turning down and the previous markets for Chinese goods are continuing to slow with Chinese PMI reportedly showing softness too. For many, the level of Chinese inflation is only acceptable if real growth is being delivered.
While the West is stagnating, Chinese organization and optimism can be appreciated as ground is broken on what is set to be Beijing's tallest building? This is part of a redevelopment/extension of the city’s business district and is a low carbon project which chimes with a general movement in China towards more sustainable investments - in line with the country’s 12th Five Year Plan which has a focus on environment.
Official vehicle registration stats now have more than 100 million passenger cars registered in China. By comparison at the end of 2008 (latest data) there were 198 million registered cars across the EU15 countries and 223 million if you expand Europe to the EU23 countries.
With approximately 50% of the number of vehicles, all on more frequent oil changes, China’s lubricants demand will be more than half of the whole of Europe. As the Chinese vehicle population is growing by 10% annually, as opposed to less than one percent in Europe, China’s lubricants market will continue to grow apace, also becoming more sophisticated as the environmental pressures begin to be felt.
Between 2006 to 2010, the country posted an average annual growth of 9.5 million automobiles. The first eight months of this year saw 9.83 million new automobiles hit the country's roads, almost 80% of which were passenger cars, making China the world’s largest auto market.
Not surprisingly, China's major cities have had to deal with recurring gridlock and other traffic-related issues as a result. Several cities have tightened automobile purchase policies in an effort to combat traffic jams. Beijing, for instance, has now introduced a monthly lottery for those wishing to register new vehicles, with slim chances of winning for the record numbers of applicants.
There is increasing official concern at new incentive schemes for trading in five-year-old cars which, while addressing pollution issues and potentially saving the new car market, also adds further pressures to the roads as trading in a car bypasses the vehicle cap and, for example, Beijing’s registration lottery.
However the Chinese are very attached to their new transport freedom. A recent failure of the car free day shows how hard it may be to break people's desire to use cars. Once the genie is out of the bottle, it is difficult to put it back. On the positive side, at least this is good news for lubricants producers.
As always, if you would like to contact the OATS China team or have any feedback, ideas or possible content we would be delighted to hear from you. Just contact Diana Shen at DShen@oats.co.uk.
Sebastian Crawshaw, Chairman OATS