Big Mac Theory of economics

For those of you that subscribe to the Big-Mac theory of economics, I hope you will find this interesting.  The price of the Big-Mac anyplace in the greater Shanghai area seems to be approx. $2.20.  Now I am not sure what the current price is for the Big mac in the US but this seems very high to me.  So that you don’t get the wrong impression like we only go to Expat McDonalds, all the other people in the restaurant were Chinese.  I don’t really subscribe to this theory because on our walk we pass many very small shops that cater to the poorer Chinese where the most expensive meal is $1.25.  For another reference point, we bought ½ liter bottles of pop for $0.40 each.  So I like to say that the prices here are no different than in Detroit if you buy these items (not imported goods).  Now if you compare this to the fact that the high level engineers in the company make approx $50,000, that means that the standard of living here is slightly lower than the US.  The interesting thing is that bicycles here are very cheap if you don’t need a high performance bike.  For a typical bike you will pay $30, if you want 20+ speeds you will pay $100, and for an electric bike (which are very popular) you will pay $150.  Cell phones here are cheap and most are pay as you go except for those that have iphones and these are becoming very popular. 

To live like a westerner (with a mix of local and imported goods) you will probably pay twice what we pay in Detroit area.  There area approx 100,000 foreigners in Shanghai but they still make up only a very small portion of the population.

Inflation, especially for housing is very high.  The typical apartment building is fully sold out before it has the roof on it and are typically bought by people with connections.  The value of these properties has been increasing about 25% per year, and they continue to build more and more.  There are very few non high rise buildings in Shanghai, but some still do exist.  In these small residences, people live like they have for many years with only the basic needs.