Business Internet China - « second tier-cities

June 15

« second tier-cities » in Central and West China

Reproduced with kind permission of China Briefing magazine

Chongqing

The Guardian newspaper recently called Chongqing “the megalopolis you’ve never heard of”, which is probably true for most people outside China. The paper noted that every day builders lay 137,000 sq m of new floor space for buildings, the economy grows by RMB99m, and 1,370 people arrive from the countryside.

It was designated a municipality in 1997, bringing it under the direct control of Beijing, to spearhead the development of the west and to manage the Three Gorges project. Its 31m population makes it the world’s largest city by some definitions – indeed its population is already bigger than that of Peru or Iraq - although the metropolitan area has (only !) around 12m, expected to grow to 20m in 10 years. Chongqing is still very much a Sichuanese city. Located in a rugged valley, and bisected by the Yangtze and Jialing Rivers, it has for centuries been a strategically important city for trade in and out of China’s heartland.

During the Sino-Japanese War, it was transformed into a heavy industrial city, with military industries that thrived after 1949. Since the 1980s, many of these enterprises turned from producing military goods to mostly civilian goods. Chongqing has undergone dramatic development over the past few years, with high rise tower blocks and many new logistics facilities. Excellent transport links exist, by rail, road, and river, to the rest of China. Pollution is a major issue, however, and the city waste dumps are struggling to absorb 3,500 tonnes of rubbish daily. For this reason, it seems to be somewhat less popular amongst the expat community than its near neighbour Chengdu.

Wuhan

“A huge, sprawling beast of a city”, as the South China Morning Post recently put it, Wuhan is a conglomeration of three towns around the confluence of the Yangtze and Han rivers. At the very centre of China, it marks the intersection of the Beijing-Zhuhai and the Shanghai-Chongqing expressways, and is the biggest river port in the Yangtze’s middle reaches. Wuhan is notable for its universities too – it has seven of the top 100 universities, and 13 other large educational institutions. And it is forever associated with Chairman Mao - he swam across the Yangtze here in 1956 to demonstrate his physical fitness.

About 90% of Wuhan’s imports and exports - dominated by the car, electronics and petrochemicals industries - are shipped along the Yangtze. The prices are competitive – RMB2,000 to ship a container by barge to Shanghai, compared to RMB5,000 by rail and RMB8,000-10,000 by road. In other infrastructure developments, the largest marshalling yard in Asia began construction in April, new high-speed trains will connect Wuhan to Shanghai in 10 hours instead of 18 later this year, and it will also become one of China’s new “regional hubs” for air traffic.

Expensive bars and cafes occupying the old European colonial buildings along the Shanghai-style waterfront lend Wuhan an air of commercial sophistication. But business people report that profits are low. Willy Zhang, manager for Swedish packaging firm, told the South China Morning Post, “foreign investors need to understand it will take 10 years to make a profit here, not three”.

Taiyuan

Taiyuan has abundant mineral resources, and is known as “the home of coal and iron”. Its industries include metallurgy, machinery, and chemical engineering and it is China’s largest base for producing coke and specialized steel. This combination makes it a fairly polluted place !

The skyline is changing fast – as city area starts spreading outwards, chimneys are lost to modern condominium-like construction. The city centre is full of interesting modern restaurants and shops along the streets – including a Burberry store. The city was also the home of the first banker in China, whose family invented the concept of cheques.

In what is one interesting development for this city, Sunnylife Global, a US-based health care management company, signed a US$12m deal with Taiyuan No.7 Hospital to remodel it as the Shanxi World Friendship Hospital. Sunnylife is in multiple JV agreements with the Chinese government to renovate and revitalize China’s older hospital facilities to meet current international standards.

Guiyang

The capital of Guizhou province, the city is home to heavy industry and still has to really benefit from the boom times on the eastern seaboard, but it’s not an unattractive place and has its merits. It is one of China’s major producers of nonferrous metals and tobacco, and major industries also include machinery, steel making, food processing, and chemicals.

The urban landscape is being transformed with the construction of the Jinyang New District, northwest of the city proper, which will have a population of 180,000 by 2010 in 17 sq km of new development.

Chengdu

The Sichuanese capital has advanced computer and precision manufacturing industry and is the financial and IT hub for southwest China. Intel is one major investor with several factories and more building. According to Cendant, 36% of companies expect it to be an active assignment location in next three years. According to local expats, “Chengdu is swapping its older Chinese flavour for a more modern, stylish Chinese look, but despite its efforts, Chengdu still remains chaotic in traffic patterns, hygiene standards, and construction methods”.

An increasing number of foreigners are moving in, bringing an “explosion” of foreign restaurants, and clothing shops such as Peter’s Tex Mex, the Grandma’s Kitchen restaurant chain, Joyce’s Barbeque, United Colours of Benetton, and Lapis Lazuli. Competing with Carrefour is Sabrina’s, a small import store carrying “everything that an American could want”. 24-hour convenience stores, similar to those in Shanghai, have also appeared recently, and there are now five Starbucks.

In terms of infrastructure, metro construction has begun, and the city has also started “an incredible make-over project”, residents say, with intersections, lights, flower beds, sidewalks all looking “disturbingly modern and clean”. There is also a major effort to make air breathable - heavy industry must now exist outside of the second ring road and “there is now a noticeable difference in the air quality”, locals tell us.

Kunming

Kunming is the capital of Yunnan province and one of China’s most attractive tourist cities. Because of its remote location, Kunming was somewhat ignored by China’s rapid economic growth in the 1990s. However, recently the city has received more attention, launching it into an international hub to access Southeast Asia. Several railroads and highways have been planned to connect Kunming to areas of Thailand, Vietnam, and Laos, providing direct access to ports.

The salt and phosphate mines around Kunming are some of China’s best. It is developing as a major international flower center, and fresh blooms are everywhere, and inexpensive, often sold by the roadside.

Central Kunming is a fairly sterile modern city, but the area around the Cuihu Park is nice, full of peacocks nesting in trees and a whole area of bars and restaurants on the west shore. There are some decent bars and cafes, Hump Over The Himalayas and Cafe Francais Lan Bai Hong. Kunming is also a golfing destination with a Jack Nicklaus signature course in nearby Yiliang.