China’s Door Opener to Southeast Asia

High up on a huge plateau next to the Himalayas, Kunming was far off the rest of China for most of its history. The global power struggle of foreign states a century ago initiated its catching-up: Railways to the French and British colonies Indochina and Burma were established, and under the distress of World War II, Kunming grew rapidly in importance. From here, Western airfcraft aided the strikes against the Japanese invasion. With the refugees from the occupied territories also came the industry that they had evacuated and transported in parts and then rebuilt to produce weapons. In those days, Kunming was considered a national redoubt, in case the wartime capital Chongqing would be lost. But today, Kunming is destined to develop into China’s open door towards Southeast Asia and India, in order to help obtaining a higher share of the global economy for China.

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Kunming on the map

Kunming, a bustling metropolis of 4 million people, is an important regional economic powerhouse. Southwestern China recently came to enjoy especially high economic growth rates due to the successful combination of China’s opening-up with the „Go West“ initiative of the government. The same infrastructural stimulus packages that the State Council granted to so many other administrative units in reaction to the world financial crisis has been appreciated and taken up here as well. But, compared to other provincial capitals, Kunming has some long-term features in its favor, in particular the advantageous location near the border, the mild subtropical highland climate all year round, and the impressive beauty of its surroundings which make it a top tourist destination in China.

The current plans for infrastructural development are convincing. First, Kunming is destined to develop into the fourth largest airport in China. Therefore, it will have to overtake Chengdu and Shenzhen which are better developed cities and have a considerably higher population. But Kunming airport already is ahead of some cities of the same development level or size (e.g. Wuhan, Xi’an, Chonqing, Hangzhou). Connections within China and to several East Asian countries are already well established, while links to other world regions have yet to be developed (flights currently depart to Paris, Dubai and Calcutta). Second, China’s existing infrastructure plans for international high-speed trains center predominantly around Kunming. Business travellers and tourists will be able to directly reach Bangkok, Hanoi, Kuala Lumpur and Singapore from here. There are even plans for a trainline to India and on to Iran, Turkey and Egypt. This may sound overly optimistic, but at least the near future seems bright. Third, Kunming is right now in the process of being integrated into China’s own high-speed train network. Infrastructural measures in this respect are important to ensure that Kunming will not fall behind the developmental speed of its competitors, the significantly bigger metropolises Chengdu and Chongqing, to which it will soon be linked. Also a high-speed train to number-one-metropolis Shanghai via booming Changsha will be opened soon. And in the town itself, two metro lines have gone into operation (alltogether six lines are planned): These routes favor Chenggong district which was known as a „ghost town“ and is now expected to attract people looking for apartments in the prestigious area east of Dian lake.

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In a hilly surrounding lies a bustling metropolis being built up heavily

Kunming has a long history as a location for industrial development. It all started with weaponry for warfare, and under Mao’s reign these industrial beginnings soon developed into complexes of chemical, iron and steel industry. Since then, a number of economy branches have set up their business in Kunming. There is diverse manufacturing (machine tools, electrical machinery, equipment, automobiles), plastics, cement, textile and tobacco industry, organic farming, bio-pharmaceutical production, and andvanced composite materials. Some minerals are abundant here, like phosphorus and salt. Kunming is proud to be the horticultural center of Asia. And, last but not least, the Kunming Fair has been a huge success over the years, co-sponsored by all of the region’s provinces (Sichuan, Chongqing, Guizhou, Guangxi, and Tibet). Being a city of high reputation that houses many educational centers, it should be easy to attract qualified staff from the local job market.

The high-speed railway link to Chongqing will strengthen inter-city cooperation as well as competition – both being crucial elements of China’s economic boom. And with the connection to Shanghai, Kunming comes into reach of the current boomtowns Changsha and Hangzhou. Competition with its smaller booming neighbor Guiyang, that is also connected through this line, will intensify. However, as the major river in the city, Panlong River, is not much more than a mere canal, Kunming has to cooperate with the ports of Beihai, Zhanjiang and Chongqing to ship its goods. Landlocked, it nevertheless strives to become the major logistics hub in the Mekong River Subregion, a probable result when the Pan-Asia railway construction will be finished.

The GDP growth of Kunming was 14 per cent in 2012, and 13 per cent in 2013. There are three national-level development zones in the city. One ETDZ, one high-tech industrial development zone, and a „national holiday zone“ at Dian lake. Well, it is: Kunming and its surrounding province Yunnan – that feels like nature and industry put together in a powerful combination. Hence, the motto of the horticultural exhibition in 1999, which first shed internationally-noticed light on the city, was: „Man and nature marching into the 21st century.“ Under Deng Xiaoping’s lead, Yunnan had developed into a famously-known tourist place of scenic beauty. For many, it is the most beautiful of China’s provinces. To illustrate the diversity of nature, we simply need to look at the fact that Kunming’s area spans from 700 to 4.250 metres in altitude, the core city being situated at about 1.900 m. Dozens of millions of tourists come to visit this corner of China every year to see places like Dali, Lijiang and Shangri-La with their own eyes. Increasingly, Han Chinese come here to learn about the culture of their country’s diverse minorities, many of whom live in this region. Yunnan’s special feature as a top tourist destination will play a part in attracting people and enterprises, and that helps increase the revenues in other branches like real estate, retail, logistics, or financial services.

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Another insightful view on Kunming’s impressing and emerging skyline

With the economic rise of Southeast Asia, foreign direct investment will continue to cross borders in all directions. China is already heavily investing into countries like Laos and Cambodia. Once Vietnam will intensify its efforts in development and modernization, it will become a very favorable place for Chinese investments as well. On the other hand, especially Thai business people have peered at Kunming which seems to them a logical foothold in China. If the Greater Mekong Subregion once will become a Free Trade Area, Kunming will quickly develop into an important financial center and thereby bolster its regional standing. And if backward Burma will stay on the rise, Kunming will also be favored due to its proximity. It should be mentioned that a highway to Bangladesh’s coastal metropolis of Chittagong has been built via Mandaly, and that there is an important pipeline, transporting Middle Eastern and African oil from the India-owned port of Sittwe in Myanmar to Kunming.

While there is no doubt about Kunming’s geolocation, how can we be sure that an investment here pays off? What if things go wrong, international relations become tense and high-speed rail connections cannot be built as planned? Isn’t Chongqing a much better place to invest? The fact is, international transport routes are not guaranteed. While plans to connect Kunming with other Chinese metropolises to create positive network effects can be seen as quite definite, international network effects can’t be neglected. Chongqing is a huge metropolis with still giant growth rates and a migration wave that is impressive. It is the main urban center of China’s southwest, it lies directly on the Yangtze river, it has a port for big container ships, it booms within a strong regional competition with Chengdu, and it is widely said to be set for a great future. We talked about trains running from Kunming to Singapore and India, but we should add that they actually start in Chongqing, not in Kunming. So, is Kunming only a stopover, a top tourist destination with a diverse economy, or will it become a great boomtown in its own right?

In this question, it is essential to consider government support as a factor that enters into the equation. Chongqing has been booming not only because it is a great place to invest. The central government of China has done a lot to initiate and promote its growth. It has established Chongqing as a municipality, that is a provincial-level unit under its own control. Chongqing as an economic model city has been planned and supported in Beijing much more than most other cities in China. Chengdu, without this kind of central support, has always been Chongqing’s vital competitor, and both cities are profiting from their competitive stance. On the other hand, Kunming has been booming by relying on its own strengths that are due to its location. It shows rapid growth without fierce direct competition to another closely-neighboring big metropolis and without much central government support. Doing business close to international borders and counting on synergies with other states as a catalyst for economic growth may make things less foreseeable, but the local growth perspectives clearly surpass the improbable risk of uncontrolled political tensions in the region. The greater risk would rather lie in missing out on the opportunities of Kunming’s expansion. Prospects are bright that the city will keep its competitive edge.

There is fundamentally strong reason to expect the city to hold its rank as a most interesting place to invest even though Kunming’s outstanding growth perspectives are not independent of the geopolitical stability at the junction of South and East Asia. A range of infrastructural projects aim to keep Kunming at the forefront of economic growth in China. It profits from tourism as well as from generally favorable incentives of the local government to make the city an attractive place to live and work. We consider Kunming an especially interesting metropolis to invest, but because of great complexity of investment opportunities, entering this market should be very well-planned in advance.

© China Under Construction, 2016