If the Chinese economy is booming now, what are the chances it will bust? The Chinese government knows quite well that if they do not intentionally slow down the economy and growth, a devastating bust waits in the near future.
One of the primary forces of growth is construction. Realizing how much of the local and domestic economy is built around the construction industry, I thought a quick round of market research in our small town would provide some interseting results.
How many businesses are tied to construction in some way? I wanted to know the number of construction related businesses compared to other businesses. For construction related, I counted businesses like electricians, paint supply, concrete sellers, rebar makers, wood workers, door salesmen, and even one time buys like curtains, store front advertisement designers, and natural gas suppliers.
Along the two main streets of the development zone (our half of town), 21% of the businesses are involved in construction related work, whether directly or indirectly tied to the boom in construction.
If the construction dried up, whether quickly or slowly, another 45% of those businesses are closely tied to the construction work force (corner stores with everyday goods, restaurants, guest houses, mechanic shops). Not that everything would dry up at once, but a significant number of that 45% would not be able to continue doing business.
The smart ones of those construction related businesses are already trying to figure out what comes next. Some of them know their business will dry up sometime soon, and as always, it is a matter of knowing when to "get out while the gettin's good."
Here is the complete list of categories and the numbers of store fronts which I recorded:
58 construction related
38 corner stores & everyday goods
37 food
24 guest house & hotel
23 repair
14 empty or closed shops
13 farming materials
11 entertainment: movie, lottery, etc.
11 medical: clinics & pharmacies
10 home, electronics, mobile phone
9 hair & beauty
9 auto sales and parts
6 government
4 commercial training and services
2 under construction
1 clothing
1 bus station
A total of 271 businesses.
I have a few extra comments on those numbers:
I have never quite figured out how so many small corner stores selling the same drinks, cigarettes, and small everyday items could possibly coexist practically next to each other, but they are a consistent theme in Chinese cities. The food and guest house categories certainly spiked near the bus station. Most clothing stores are across the river, explaining the low numbers there. I also happened to walk by the best places in town to buy farming materials, as well as the cluster of auto repair places, so those numbers are probably not accurate representations of the whole town.
Of course, when taken as a whole, I think the 20% construction related businesses is more than accurate for our half of town. And now that I think of it, half of 20% would be 10%, China's percentage of growth right now. If the construction suddenly stopped, all the construction related businesses would be out of business and a good number of the corner stores, restaurants, guest houses, and repair shops would be close behind.
How can we prepare for the future? If the government plays their cards right, there will be no bust, but there will still be a decrease in the amazing number of businesses focused on supporting the construction industry and its work force.
