Shanghai is a city in the middle of an auto boom. A combination of falling prices due to fierce competition among manufacturers and declining tariffs since China joined the WTO; new ranges of lower priced family cars; the recent widespread availability of car loans from local banks; and the general desire to own a car are all pushing up the number of vehicles of the road.

However, reports Access Asia, simply securing the cash or loan to buy a car is only half the game – the other half is getting a licence plate. No licence plate then no permission to purchase a vehicle. In 2000 the Shanghai government issued 14,000 plates, in 2001 15,900 and in 2002 31,850. Last year the authorities raised the quota to 53,068 plates but still demand is outstripping availability.

This has led to some crazy prices being paid for plates. The government holds auctions where citizens bid for the plates. At an auction last week in the city the average price for a licence plate was a record shattering RMB43,333 ($US5,221). This was not just a record since the auctions began four years ago but was also significantly higher than the average at last month’s auction which was RMB3,400 lower.

Now the government is faced with a quandary. Demand for licence plates is high indicating that many people want to buy cars (or speculate in licence plates) which is good for the economy as it will shift vehicles as well as contributing nicely to the Shanghai government’s treasury. However, traffic in the city is increasingly slow moving, streets congested and car-related pollution now the major cause of declining air quality in what has never been the cleanest of urban centres.

The government has also inadvertently added to the rising cost of licence plates by outlawing the once common practice of going to a neighbouring province (for instance Anhui, Zhejiang or Jiangsu) and buying a plate there where lower car ownership means lower prices at auction. You could drive around Shanghai largely untroubled on an out-of-town plate purchased for as little as a few hundred RMB. No longer, and so last weekend 10,000 hopeful would-be motorists were bidding for 4,800 available plates.

There is one other way to get a plate – you can now trade in your motorcycle plate for a car plate. Last week thousands of motorcyclists queued up to swap their plates in what is a 20-day period in which to do it. Not surprisingly, despite cold weather and sheeting rain people kept on coming – a plate you paid a few RMB for is now potentially worth US$5,000 – easy money. You are permitted to sell the car plate you receive at the next auction.

People who have not ridden their rusting old moped in years are suddenly finding that the number plate is a handy source of free cash. At this rate by 2005 the government expects 50,000 of the city’s 60,000 registered motorcyclists to have traded up to car plates. A nice little earner for the plate holders but those living in Shanghai cannot but wonder with worry at what another 50,000 vehicles on the roads by 2005 will be like.