I was alerted by a good friend to the following article about the Chinese boating market. As far as I am concerned it is one of the best examples how you can use statistic information to create utter bullshit. Let’s have a look at the article first:
China has over 90,000 lakes, 6,500 islands, and about 20,000 kilometers of waterfront coastline.
source: Chinese National Statistics Bureau
With a GDP of USD $1.3 billion, China can expect to have a boat demand reaching 550,000 units with the following breakdown:
- 78,000 in Guangdong
- 73,000 in Jiangsu
- 37,000 in Shanghai
There are 56 marinas planned or currently under construction in China. China had approximately 150 boat yards in China in 2006. More than 50 of these are export boat production capable.
China is currently the third largest market in the world for big ticket items. Annual sales are roughly 10% of global market share worth approximately USD $2 billion. The target market for big ticket items includes about 160 million Chinese people, about 13 million of which are active shoppers frequently seeking big ticket items. By 2015, this market will reach $11.5 billion USD taking a global market share of 29%.
source: Ernst & Young
The standard Chinese labor rate is $0.70 per hour, which is about 1/16th that of the American labor rate. China has 1 million rural citizens who could be moved to cities every year to keep the general labor cost at a fraction of the U.S. labor cost.
source: Chinese Department of Labor
Ok, now let’s take this apart one by one.
1) Let’s assume for a moment that the figures about lakes, islands, and coastline are true (personally I think they are doubtful at least). What the article does not mention is the fact that the regime in China is still extremely nervous about people cruising around in their private boats along their coast. That is reflected in their system of boating licenses, which are only for certain limited areas. Of course, those people who have enough money in China to buy a decent size yacht, are usually the same people that can afford the right ‘incentives’ to obtain all the licenses they need.
2) With in fact only something like 10 marina’s (which are more expensive than Japanese golf club memberships) in place, the planned 56 ones (a figure that is still the same as 5 years ago) will hardly be enough to facilitate 550,000 boats. Let alone that taking a GDP figure, and deduct from that the boat demand, is at least a bit doubtful. What’s the GDP of Nepal again?
3) Don’t get me started on the quality of the 150 or so boat yards. Apart from a few foreign owned/managed ones, the majority is definitely not up to international standard, let alone export standard (Except maybe to Birma).
4) For a labour rate of USD 0.70 per hour, you won’t get anybody to sweep the floor anymore, let alone build high quality boats. In my company a starting mechanic is being paid 5 times that amount. Secondly, labour rates don’t say anything about production costs in a place where you need 5 – 6 times the people to do the same job like in most western countries. Add the costs due to production losses because of poor workmanship, frequent power outages, corruption in all levels of society, and a decreasing competitiveness caused by the strengthening of the RMB versus the dollar, and an inflation which was 7.1% year-on-year last month.
It’s ‘wishful thinking’ articles like the one above, that give a totally wrong idea what the real situation here is like. Yes, there will be a growing interest in boating and sailing in China, with a steadily growing middle class. But by far not to the extent as this article tries to make us believe.