With a population 54.5x the size of Australia, the world’s second-biggest economy, and the largest manufacturer and exporter of goods worldwide, it’s easy to see why China is high on an investment trip list.
But more recently, headlines have been plastered with property meltdowns, population and birth rate declines.
So just how is China going after closing its doors on the world, following the harshest covid policies and longest lockdowns?
Or simply for context, where is all of that iron ore we are digging up going?
In November 2023, I made my second trip to China (the first being back when I was in High School in 1999). The trip wasn’t for Rask or work, but for a family holiday with my parents, mainly for my mum who needed to renew her ID docs in Hong Kong.
A bit of background on me before we get stuck into the trip proper…
My parents immigrated to Australia in the 1970s, after getting married in Hong Kong, where my mum was born. As for Dad, he was born in mainland China. Me? I’m born and raised in Melbourne, and would consider myself a pretty normal Aussie who loves footy and cricket.
I don’t speak Mandarin, but I can speak Cantonese fairly fluently (but my vocab is at the level of a primary school kid, and Cantonese is only spoken in some parts of Southern China, Hong Kong & Macau). I don’t have any strong political or geopolitical views, either direction, so this write up will focus on the things which really caught my investment curiosity.
I’ve also been fortunate enough to have travelled and backpacked through a lot of Europe, the Americas and South East Asia. Different cultures fascinate me.
I hope this write-up, and some amateur photography, help us all invest better for the next decade or two.
The trip
In China we spent most of our time in Kaiping – a county-level city in Guangdong with a population of 688,242 (2017 census). This means it’s a long, long way from Tier 1 cities with populations like Shanghai ~22m, and Beijing ~19m. We also made short day trips to Shenzhen, Haikou and Guangzhou. I think a lot of my personal dealings would have been more representative of the average Chinese, rather than those visiting the standout tier-one megacities cities for which the country is now most famous.
With my investor cap on, China has always been a place of interest. We’ve all heard the mind blogging statistics. Like how China used enough cement in just 2-3 years to match the US in the entire 20th century. And you may have experienced first hand how Daigou’s (personal shoppers) have been clearing out infant formula shelves at your local Coles & Woolies to ship back to parents in China.
Based on what I’ve seen, only one thing is for sure: it’s hard to get perspective on just how much China has evolved until you get your feet on the ground and see this country first hand with your own eyes.
Boy, did this place surprise me in the most positive kind of way…
MAJOR LEARNINGS
1. Mega scale change
One of the quickest realisations was the incredible scale of engineering and infrastructure that has been executed in China in a very short amount of time.
Put simply, the transformation and technological know-how is mind blowing in a way no news article or photograph can ever capture.
Reinforcing this point is the sheer pace at which this is all happening. Personally speaking, this was my biggest takeaway from the trip, and one which feels significantly underestimated by Western media.
While by no means do I stand for its treatment of minority ethnic groups, draconian punishments, ubiquitous surveillance, or big brother state policies the country remains infamous for. Neither do I find myself in favour of violent crime, drugs and other issues we face more regularly in the West.
Digressions aside, let me sit back on the fence and talk more about the cool and interesting stuff that’s relevant.
In short, though, the scale of infrastructure, commercial and residential, transport (see below) and industrial is almost unbelievable…
2. High speed rail
Having been lucky enough to visit Japan in 2017, I was in awe of bullet trains. Fast, safe, and they make travelling so easy.
China has not only caught up in this regard but now moved light years ahead.
What’s staggering about this rollout is that since 2008 China has expanded its high speed rail network from 118 km (Beijing to Tianjin) to an unbelievable 42,000 km! Connecting every major city in its own real life game of Ticket to Ride. For context, Japan’s total bullet train rail system is 2,830km today.
Meaning, in just 15 years, China built over 14x more high speed rail than Japan – the country which most consider synonymous when you mention the words “bullet train”.
Incredible.
My experience on China’s high speed trains was limited to the line from Kaiping to Hong Kong. It was equally as fast, safe and luxurious as its Japanese counterpart. Hitting speeds well over 300km/h, the entire journey only took 2 hours and 20 mins (including a 15 min stop in Guangzhou), and was bang on time. The equivalent bus or car ride for the ~250km journey, would have taken 4-5+ hours in traffic.
Pricing is good too. The cost of a one-way 2nd class seat on this route is ¥292 RMB ($A64.12 – bags, taxes and card fees included). Booking is as simple as booking any flight online, and all done through the Alipay app (all with English translations). At the station, it’s as easy as scanning your passport or Chinese ID to enter the platform. There’s no need for tickets (or ticket inspectors), and seats are automatically assigned with aisle or window preferences.
Speaking to locals, it has completely disrupted travel inside China. Passengers can travel to more destinations and stations vs flying, and the door-to-door times are faster without having to deal with transit, bag check-ins and airport security. On board, there’s wifi, food and drink service carts, toilets, and the seats even have a 180 degree swivel function so they are always facing the right direction of travel when the train changes direction.
Talk about a game changer in-country travel.
Below, I’ve included my video to show you the difference between the train and the highway.
I’d love it if you could take a moment to reflect on this…
In under 15 years, China mobilised a skilled workforce, organised imports and trade routes, coordinated the cities, people, housing and rearranged existing infrastructure to build the world’s most advanced bullet train network of 42,000 km.
For context, if you built a bullet train to run from Perth to Adelaide to Geelong to Melbourne to Albury to Canberra to Wollongong to Sydney to Newcastle to Gold Coast to Brisbane to Sunshine Coast to Rockhampton to Airlie Beach to Townsville to Cairns to NT’s Tennant Creek (that’s a long way) to Darwin (also a long way) then back down to Katherine and over to Halls Creek into WA across to Broome down to Karratha and further south to Carnarvon and stopping at Geraldton then back to Perth… that’s ‘only’ 14,000 km.
But then let’s imagine you also took that approach to other things…
3. Roads & next generation EVs
The difference between ‘then and now’ was equally staggering on Chinese roads.
The 2-hour (155km) journey from Guangzhou airport to Kaiping was almost entirely done by freeway/highway.
Again, this appeared to be a major step up when compared to Aussie roads. 4-6 lanes wide, the roads were silky smooth, free from potholes and without major traffic jams or roadworks. They aren’t resting on their laurels, either, with plenty more to be completed.
Here’s some elevated expressways still in progress.
Grand tours take on Chinese roads in 2019
Gone are the days of beaten-up buses, locals on horses and pushbikes on major roads.
Instead, you’ll now find a royal flush of German brands including Porsche, Audi, Mercedes and BMW (clearly demonstrating the rise of China’s middle class).
China’s 24×7 surveillance is most head turning here. With more road and safety cameras that flash and capture every vehicle on every lane, every few kms. These flash day and night and snap motorists even when they aren’t speeding or breaking any laws.
Even more striking was the amount of Chinese-made Electric Vehicles (EVs).
Of course there were plenty of Tesla’s around, with the Shanghai Gigafactory 3 churning out over 2 million vehicles from its opening in Dec 2019 – Sep 2023. However, the array of other brands – that I’d never heard of – was truly eye opening.
In short, I think the world should brace itself for an incoming tsunami of Chinese made EV’s.
While right-hand drive models will indefinitely take longer to hit Aussie shores, other markets should see a whole lot more from names like BYD, NIO, GAC Aion, Aito (a brand of Huawei), Venucia (a brand of Nissan & Dongfeng), and Xpeng (VW Group buying 5% of the company earlier this year) very soon.
Just do a search on YouTube or Google for some of the names I’ve mentioned. See for yourself.
Getting up close to these Chinese cars has left the following takeaways in my mind:
1) Competition is brutal and it’s driving down costs hard.
Not only have these car makers come an incredibly long way after not even existing 4-6 years ago, but the build quality is high. This will be a huge win for consumers worldwide and for the transition towards net zero carbon emissions.
2) On the software and tech side of things, China is already ahead.
And while they might not be surpassing more established brands from the Japanese and Germans from a drive-ability perspective just yet, the rapid iteration & innovation cycle, and fierce competition could breed the class-leading EV’s of tomorrow.
3) Tomorrow is coming to the world with some serious pace, and legacy car makers should be worried.
Let’s zoom out again…
To support this EV avalanche, China has close to 1.8 million charging stations country wide. Australia doesn’t even register on this scale with a report from the Electric Vehicle Council (EVC) estimating we have nearly 5,000 individual charging plugs at the end of 2022 nationwide.
Ramming this Chinese EV boom point home was how almost all of the Didi (Chinese equivalent of Uber) rideshare cars we travelled in were already electric.
Just like how South Korean cars were once ugly ducklings, to now becoming commonplace and thought of as quality on our roads, I expect the same from China’s next generation EVs. Where other industries have moved from a mechanical era towards the electronic. We’re now in a fully software era.
The car industry will be no different.
4. Property & Macro level city planning
The scope of development and city projects is equally astonishing.
We stayed in a 3-bedroom apartment (see below), which consisted of 2-3 more apartments per level. Each apartment tower was generally 12 levels high. While every stage of this project had at least 8 apartment towers, with the total stages close to 14.
(For the maths inclined, that’s 14 stages x 8 towers x 12 levels x 3 apartments = 4,032 apartments for sale or rent).
Having been a development manager with experience in high density residential projects in my previous life seeing something as large as this was astounding.
This was a completely private community with resident scan-in gates, equipped with underground parking that was shared across multiple towers. Around the towers were man made canals, walkways, playgrounds and lots of green spaces and areas for families and kids to enjoy.
Don’t forget the city above isn’t a Tier 1 or even a Tier 3 city.
It’s considered a county level city.
The project is also already 10-15 years old. This macro level city planning allows China to have far higher population densities than I have ever seen. The pro’s of this include efficiency and scale to lower building costs, but it also creates far more environmentally friendly and more sustainable development. Other benefits include services such as food delivery and e-commerce at a fraction of the cost.
This attached way of living might not be for everyone, particularly those living The Great Australian Dream, but it’s something I had not even considered as possible when thinking about high density living. And I have quite a bit of experience in large property development projects.
On a more negative note. Sentiment for property prices have fallen hard from previous highs. The sense amongst locals was that capital gains, which were all too common and easy during the boom years, have all but dried up for investors.
With sales for new apartments plunging, cash-strapped developers have seen their balance sheets buckling under massive debt piles. Many projects are now left in limbo. With property prices having such a significant wealth effect on consumer spending and economic growth, this will be a very big obstacle for the country to overcome.
5. Life in China
As much as the technological leaps have been impressive, so too have been the inevitable rise of living standards, consumption and overall earnings power of the Chinese.
Speaking with people, while things are undoubtedly more difficult since the property prices have deflated under mountains of debt, on the whole, most still have a positive outlook.
The average Chinese person without a uni degree can earn ~¥7,000 RMB (A$1,500) per month as a courier or delivery driver (with company vehicles provided). Like Australia, there appears plenty of work around for those looking and willing. While on average their work hours are indeed longer, at ~48 hours per week, it’s enough for most to save and support mortgages with most paying around 3-4% interest rates.
An interesting fact which I was unaware of is that most Chinese retire at age 50 or 55, and are eligible to receive an average monthly pension of ~¥3,000 RMB (A$640) as well as medical benefits. This will certainly be a decent headwind for the country, particularly as estimates have China’s retirement-age population surpassing that of the entire USA inside two decades.
This swing in its ageing population has meant that in 2022, deaths exceeded birth rates in China.
Another headwind is the country’s strange gender imbalance, which is causing marriage squeezes around the country. The fallout from its now reversed one-child policy has meant couples nowadays are getting married later, with total birth rates plummeting. Adding to this is increasing pressure for the groom and his family to provide substantial financial support and/or gifts to the bride and her family.
On the environmental front, while it wasn’t all blue skies, air quality has improved vastly since my last visit. There’s still the odd day where it was quite hazy and intermittent smog, but in general it’s a lot nicer outdoors now.
In a similar vein, life generally felt pretty positive with my limited interaction with the people in China.
Most restaurants were busy with families enjoying meals, while a visit to a city park showed people playing table tennis, chess and enjoying public spaces. There was little graffiti, streets were generally pretty clean, and it certainly didn’t feel like people were unhappy or holding any strong negativity towards their government.
Some parting thoughts
Going into this trip I had just written up our team’s thoughts on China and its potential to challenge the United States as the world’s leading economic superpower.
Owen tasked me to do this over recent months, as we think about rebalancing our ETF portfolios for members and think about the rise of China versus the USA for the next 30 years.
My preemptive view was that China’s debt problems and declining population numbers would remain obstacles too big for it to assume the #1 crown.
However, after seeing what this country has achieved in the past 2-3 decades first hand, I may very well have been too quick to dismiss China.
China’s world class infrastructure it has already built means it has an almost unrivalled engineering and manufacturing capability which can scale, innovate, and execute like nothing this world has ever seen.
The future remains bright for all things made in China, and it’s one we are following with a close eye.
TIPS FOR FELLOW TRAVELLERS
Finally, I’ve been blessed to travel to China with family. So if you’re thinking of going, here are some things that might help…
It ain’t easy for foreigners
From the visa, to customs and immigration to enter the country, paying for stuff and, of course, the great software (fire)wall. Things in China ain’t so friendly for foreigners and tourists as you may be accustomed to elsewhere.
For anyone wanting to visit the country, my advice is to plan well ahead.
Getting in
Planning holidays is pretty simple when you hold an Aussie passport. For most countries it’s as easy as rocking up and getting your stamp at any destination airport on arrival.
Not so for China.
For starters you’ll need a visa, and this means applying for one at least a month in advance before travelling. This involves submitting an application online, as well as having to book an in-person visit to their visa application service centres.
There, you’ll need to wait in line for your mountain of paperwork to be checked, plus being ok for the Chinese government to have your fingerprints and biometrics on file. Turnaround times mean waiting another fortnight to go back to collect your passport and approved visa.
The price for Aussies to get this visa reflects the deteriorating political and trade trends with China. For us, a 12-month multiple entry visa costs A$229.50, while other countries only pay A$199.50. Could be worse though – for Americans this rises to $328.50!
Patience is needed when you first land on Chinese soil too. The lines for foreigners at immigration are long, and English is limited. I’m not sure if it was my visits to the USA, my dodgy-looking passport photo, or because it was my first entry to China on my current passport; I needed additional verification of my documents and was asked to move to another line. This meant 20 minutes and multiple government officials thoroughly examining every page of my passport before finally letting me through.
There’s no cash, and no tap to pay
We’re pretty spoiled in terms of banking and payments in Australia. Most of us now have the convenience of Apple or Google Wallet, or at least tapping or swiping with our credit and debit cards.
In China, cash is pretty much extinct, and you’ll be hard pressed to find anyone accepting credit cards. Instead, you’ll need Alipay or WeChat setup on your smartphone and a working internet connection. These apps are a bit of a pain to set up in all honesty. So I would advise fellow travellers to get these done at home, before jetting off. The apps need accounts to be registered, credit/debit cards to be linked, plus you need to upload your passport & photos of yourself to be checked and approved.
(Bonus tip: Make sure you’re Aussie sim card can receive SMS texts while you’re overseas as some payments will need a further verification code sent through to be approved).
Once set up, things run more smoothly. Smaller merchants will have a QR sticker at the payment counter which you can scan using Alipay or Wechat app and then you input the cost for security. While for larger and more established stores, they will have a QR code scanner machine, so you bring up the QR code (which regenerates every time for security) on your own phone, and put it in front of their camera scanner and accept payment on your phone with a payment password.
From my personal experience it worked well enough, but wasn’t quite as slick as Apple or Google pay. Perhaps it was because I wasn’t familiar with using it like the locals were, but there seemed to be a bit more friction when coming to pay for things.
My takeaway here is that NFC card readers appear to work faster for payments in Australia and abroad, but it looks unlikely that either is making inroads into opposition territory.
The Great (fire)Wall
As the saying goes “you don’t know what you’ve got ’til it’s gone”.
I always had a sneaky suspicion that I was a bit too Google dependent in my life (I’m the only Rask team member left with an Android device…). My life runs on Gmail for email, while the Google Workspace is used for all things work: cloud storage, Calendar, Notes, Google docs, Maps and Google Sheets instead of Word/Excel.
My visit to China really opened my eyes to the full extent of this dependence. The majority of Western apps are inaccessible in China (think Instagram, Facebook, Twitter/X, YouTube, Google Maps, Uber, Whatsapp), and few of the Chinese equivalents have English versions.
All my emails and more importantly travel bookings were on Gmail. This meant on wifi I couldn’t Google anything, call or text family and friends on Whatsapp or messenger, or respond to any emails or click on any YouTube links.
Not only this, but for you Android users, the Google Play app store doesn’t work either, so downloading any new apps like Alipay & WeChat is doubly hard. The free wifi at some airports may even need a Chinese mobile number, making things almost impossible for those who haven’t previously setup Wechat and Alipay.
Personally I couldn’t get the VPN I had to work (Nord). But luckily I had purchased and installed an eSim beforehand with Airlo. eSims typically don’t have a phone number attached, and run on mobile data only plans, in my case 5gb for 30 days. Perhaps because the eSim routes through Singapore, or the Chinese government hasn’t banned it yet, but the Airlo eSim let me access the internet normally (albeit at a slower than normal 4G speeds).
I hope this helps!
