Chinese Caution

Many people ooh and aah over the potential market power of China. 1.3 billion consumers. A cheap labor force in the millions. GDP growing steadily at about 10%. What's not to like? You hear reports about how America's day has come and gone and how China will soon overtake the USA.

Hold your horses. China has a good chance to become a major world power, that is true. But it won't happen as fast as many think. Poverty is widespread, most of its workforce is uneducated and unskilled, the legal system is showing promise but corruption is still widespread, and capital markets are young and untested.

Well, just this week we found out Malcolm Bricklin's Visionary Vehicles will be forced to delay the arrival of its Chinese produced Chery cars in the USA. He had been claiming a 2007 arrival date, but that has now been postponed to late '08 or early '09. Starting an automotive company is difficult, as it is a highly capital intensive industry. I seriously doubt the long term viability of Bricklin's cars. I do feel Chinese produced cars will be shipped to the US in the near future due to the cheap labor there, but I think established car companies such as GM, Toyota, and Volkswagen will most likely be the ones to be successful at this. The global automotive industry is already in bad shape. The market is mature, oil prices are rising, the industry has an excess of capacity, profits are dwindling. China will soon be an economic force to deal with, but its days as a fully developed nation are still far off in the future.