Blog: Changing world order
Dave Leggett | 6 August 2010
The rising importance of the Chinese economy in the world is indisputable. It is looking like a lasting legacy of the financial crisis that ushered in the severe recession that the West is struggling to recover from. The automotive news last week contained several items that, taken together, summarised the changing world order.
JD Power said last week that car sales in Western Europe last month recorded a seasonally adjusted annualised selling rate (SAAR) of just 11.1m units a a year - the worst figure since January 2009, before the scrapping schemes began boosting the market.
And the US light vehicle market is running at an unspectacular 11.5m-12m annual running rate, even if July's number actually constituted a relatively good overall market result.
Things are a little bit different in China. The vehicle market is now bigger than the US and is hitting new records. GDP growth is still running at something like 10% per annum, with Chinese consumers enjoying rising real incomes and the increased spending it allows. Domestic demand rather than exports of manufactured goods is now becoming a driver of economic growth in China. Maybe enthusiastic Chinese consumers will eventually play an important part in helping to create manufacturing jobs in the West.
What are the newly affluent Chinese consumers buying? It's a long list, but at the top end we discovered last week that there is a taste for exotic Italian sports cars.
And Chinese companies, many with good access to cash and soft-loans underwritten by the state, are beginning to flex their muscles on the international stage, a sign of their burgeoning ambitions.
Last week, Ford finalised the sale of its Volvo division to Zhejiang Geely Holding Group for US$1.8bn. Will it make much difference to the way Volvo Cars is actually run? There will surely be differences eventually though Geely has been at pains to make reassuring noises and emphasise that it is business as usual for Volvo. This is a very big and high-profile acquisition for a Chinese company. Beijing will be anxious to see that things run smoothly. So far, so good.
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