A recent visit to my in-laws living in Lishi, a city in Shanxi province, sheds some light on China's urbanization and demand for automobiles in small cities.

The population of Lishi has increased from 230,000 to 330,000 over the past 10 years. Counting the migrant population not registered in the 2012 census, Lishi's population may have actually doubled over that time.

The increasing urban population has given rise to demands for housing and motor vehicles, making a fourth-tier city such as Lishi as crowded and polluted as a first or second-tier city.