A visit last month to some of China's second- and third-tier cities such as Kunming and Dali in Yunnan province and Chongqing in Sichuan reminded me life doesn't begin and end on China's eastern seaboard, a common expat belief. The trip wasn't for sightseeing, but rather trying to learn how these towns and cities were holding up during the global recession, which has hit Chinese exports hard.
If there's a more promising city in China than Kunming for future business opportunities I haven't seen it. Colloquially, Chinese refer to Kunming as Chuncheng, the City of Eternal Spring. The climate is temperate, the skies blue, the air clean and the overall mood relaxed.
The present also seems to be springtime for Kunming in the business sense, as well, since the city is looking like China's next big thing. 2012 is the magical year when several major projects are set to be completed, making Kunming a regional hub with China's fourth largest international airport and a vastly improved railway and highway system connecting it with much of Southeast Asia.
My conversations with the expats running cafes and bookstores indicate that the global economic crisis hasn't hit them in any significant way. Tourism isn't as robust as last year, but there hasn't been a steep decline and the future right now looks better than ever.
One business owner said once the transportation infrastructure is in place in three years, they are expecting a sharp uptick in the number of Indian and Thai businesspeople setting up shop in Kunming as their gateway to the rest of China. These people will need services, from restaurants that suit their tastes to printing and marketing and consulting.
Kunming is already a favorite spot for foreign English teachers and students studying Chinese, and with more foreign entrepreneurs and non-governmental organizations (NGOs) locating there, it seems like a perfect place for creative marketing. One thing the Kunming business community seems to agree on is that their situation is recession-proof. The government is going ahead with the infrastructure plans and if anything, investment there should only increase in the years to come.
Dali is popular for its slow pace
Like Kunming, Dali is one of those places where you wonder whether you're still in China. No one seems to be in a hurry and the mood is almost suspiciously calm. On the street old women dressed in the bright Dai minority costumes accosted us daily, asking, "You want to buy pot?" Yes, these no-nonsense business ladies are selling marijuana on the streets.
The expats in Dali are mainly entrepreneurs running restaurants and bars, and most seem to have been attracted by the city's physical beauty (it lies between a dramatic mountain range and a huge lake) and slow pace. They, too, remain relatively untouched by the global recession since most of the tourists are backpackers and students (many studying at Chinese universities), and they are still traveling.
Chris Prozhnowis is a Georgia native in his mid-20s who came to Dali as an English teacher and enjoyed hanging out in the popular local coffee house, the Caffeine Club. He liked it so much he bought it last year from its German owner and says the recession is hardly noticeable.
"It's true that we're seeing a drop in foreign tourists this year, but that loss has been almost completely erased by a corresponding increase in Chinese tourists," Mr. Prozhnowis said. "Many Chinese people are saving money by turning to domestic travel instead of going to Europe or the US, and Dali is one of their favorite spots. Business is not super-strong, but we expect to do okay because in Dali our costs are low and there will always be tourists."
His advice to entrepreneurs considering opening a business in Dali: "Don't try to cut any corners or to do things without filling in the right paperwork. In Dali, things are done legitimately and transparently. Get your licenses first and be above board with everything."
Chongqing's building frenzy halted by recession
Chongqing exists in another universe from Kunming and Dali. Like Kunming, it was targeted by the government as a key transportation hub and received huge amounts of investment capital. It's become a stereotype of the "new China"--sprawling, teeming with energy, construction everywhere and so many huge new skyscrapers you'd think it was the model for Ridley Scott's Bladerunner.
Unfortunately, it is this building frenzy that now puts Chongqing at some risk. As one reporter who has lived there for many years told me, there are now huge, half-built structures everywhere you look, but suddenly the tap has been shut off. There's a building glut, leaving the city with more office and retail space than can possibly be rented in the foreseeable future.
A couple of years ago, before the economic crisis kicked into full swing, I would have recommended Chongqing as one of the smartest places for entrepreneurs and marketers to focus their attention.
Now, I'm much more cautious. While Kunming seems unaffected by the crisis. Chongqing may well be devastated by it, at least for a couple of years. That hasn't dampened its vitality, but people who live there told me everyone's apprehensive about the immediate future.
"The Chinese can be very impatient," my reporter friend told me. "Many here were expecting to make a profit from real estate and construction and ongoing growth, and now they have to wait. It will be interesting to see how they cope with that - having their dreams put on hold all of a sudden. When I see all the empty buildings all over town, I know a lot of Chinese people will have trouble adjusting to their new reality."
The somewhat grim outlook didn't seem to manifest itself on the streets, which were teeming with life and commerce, abandoned buildings aside.
I look at Chongqing as a test: If they can be resilient enough to adapt to the new conditions and re-tailor their dreams based on this "new reality," without giving up their industriousness and drive, then they'll come out of this okay, and maybe even better off in the long-term. That goes for the rest of China as well.
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