The Telegraph - There are nine million bicycles in Beijing, sang Katie Melua in 2005. Lyricist Mike Batt might have penned slightly different lyrics if he'd written the song today, because in the space of just seven years, things have moved on remarkably in China.
In a city of 20 million people, and rising, it might be possible that there are nine million cars on the road of the Chinese capital. This is now the biggest car market in the world, having overtaken the United States; sales of 18.5 million vehicles last year are set to hit a mind-boggling 30 million a year by the end of the decade.
China accounted for just four per cent of global vehicle sales in 2001; now that figure is almost 25 per cent, so it's no wonder the world's car makers are falling over themselves to get a slice of the action. Even a small slice can be worth several hundred thousand models. But it is growth that has to be managed; in a country where the single-child rule was introduced to stem the population rise, there are already signs of "disincentives" to slow car sales, reduce congestion and improve the appalling air quality.
Beijing's government has introduced curbs on registrations – you can't buy a car without scrapping your old one, or moving it to another city. Those who have nothing to sell have to enter a monthly ballot for a registration plate.
Having opened the floodgates, it's not going to be easy to stem the tide of new cars taking to roads across the country. The nation is clamouring for independent mobility with entrepreneurial young people enthusiastically leading the way. New car buyers are in their early twenties whereas elsewhere in the world they are at least 10 years older.
Ivan Koh, president of BMW China, says that the average age of a BMW owner in China is about 30, versus 49 in Europe. Young people, he says, can get rich quite quickly as the economy booms; GDP growth rate is running at more than 15 per cent.
A staggering statistic from the Lamborghini stand at this year's Beijing motor show was that the average Chinese owner of a Lambo supercar is aged just 28. It is not uncommon to see Ferraris and Bugattis racing each other (illegally, and usually at night) through the city streets.
The premium car market is growing fast, which is why BMW has just opened its second factory in China, in the north-eastern city of Shenyang. Jaguar Land Rover is currently in talks with potential local partner Chery Automobile about establishing a plant.
This is a country of 1.3 billion people and its economy has seen massive growth in the past 20 years. The population in urban areas is set to grow by 350 million by 2025 – that's an increase greater than America's total population.
There are nine cities with a population of 10 million or more, 87 with five million to 10 million inhabitants and a staggering 176 with between one million and five million. Even Beijing at 20 million is not the largest: Shanghai boasts 23 million. Along with Guangzhou (16 million), these are among the so-called "tier one" cities. In those tier one cities, the car ownership rate has reached 70 vehicles per 1,000 people.
Car sales are now spreading into the tier two and three cities. Shenyang, home to two BMW factories, has eight million people – about the same as London.
But in tier two cities such as Shandong and Hebei, the ownership rate is only 29 vehicles per 1,000, according to market research company LMC Automotive.
That leaves considerable room for economic growth. Only five of China's 31 provinces and municipalities have tier one economies: the cities of Beijing and Shanghai and the provinces of Jiangsu, Zhejiang and Gu angdon. This gives tremendous potential elsewhere, with the tier two and three regions now the new growth engine of China's car market, while the far-flung central and western parts of the country have barely been touched by cars.
At 30 million sales, even a market share of half of one per cent is enough to sustain a 150,000-vehicle-a-year car plant, and that's before you factor in exports to other parts of Asia.
The way people buy cars is also changing. Until the turn of the millennium, most customers walked into a dealer with a case full of cash. Now financing is taking hold, although cash is still common. Establishing finance was a problem in itself as many Chinese did not have credit ratings or even use banks. General Motors' finance arm GMAC said it literally went round to people's houses to make sure they lived there and to verify their credentials. Leasing is still unheard of.
Amid all this, the premium sector is burgeoning, hence BMW's expansion and JLR's future plans. Last year BMW Group sold a record 233,630 cars in China and in the first three months of this year it sold 80,128, a rise of more than 36 per cent over the same period in 2011.
Land Rover sales jumped 68 per cent to 34,993 units, while Jaguar sales were up 58 per cent to 3,897 units. JLR and Chery Automobile's application for government permission to establish a $1.9 billion joint-venture factory in Changshu in east China's Jiangsu province would allow it to produce up to 130,000 vehicles a year.
BMW's recently opened second plant in Shenyang cost £800 million, an investment deemed worthwhile because premium is key. Koh says that China is currently the world's second largest consumer of luxury goods behind Japan and he confidently predicts that it will be number one by the end of this year.
But, as congestion and pollution increase, is the growth in car sales in China sustainable? Shi Jianhua, vice secretary general of the China Association of Automobile Manufacturers (CAAM), says that growth will have to be managed. Not surprisingly, he does not want to see measures such as those introduced in Beijing spreading to other areas of the country: "What has happened in Beijing is not a good policy – it has a strong flavour of administrative intervention and this is not the way forward.
"We need to encourage people into new energy vehicles [such as electric cars and hybrids] and the way to do that is by incentivising them. Investment in new energy vehicles is increasing."
There are currently 10,000 EVs, hybrids and fuel-cell vehicles on China's roads and 25 pilot projects in cities around the country; by the end of the current five-year plan in 2015, the number of alternatively fuelled cars is forecast to reach half a million.
So China is not only the powerhouse for the world's car industry, it is also likely to be where EVs and other alternatives to the internal combustion engine win their spurs. Good news for those worried about the image of China as one big smog bowl.