The climate is good in Kunming (winters are mild, summers pleasant), the locals are among China's most laid-back; fabulous scenery is never far away, and Southeast Asia is readily accessible. Known as the "Spring City" because it is green all year round, Kunming has become a popular golfing destination and is famous for its flowers, especially since the 1999 International Horticultural Exposition took place in the city. Many minority groups populate the hills of Yunnan province, and the Dai people's April 'water-splashing festival' is particularly popular with visitors. Kunming has a number of temples, and Green Lake Park has become a focus for restaurants and bars, many of them western.
Kunming's high rises have created a new urban landscape and the city is expanding quickly, so much so that the airport is moving further out of town. It also has more than a hundred star-rated hotels. Kunming has plenty of reasons to be cheerful about its prospects.
"Compared with 1998, the city has really changed," said Tang Pingli, sales and marketing manager at Green Lake Hotel. The hotel was founded in 1956, making it Kunming's oldest, and run by the Hilton group until it was acquired by United Tobacco in 2000. "The government is trying to set up basic construction facilities because a lot of building has gone on – people's lives have improved," said Tang.
Although tourism is what most people associate with Yunnan province, it has only taken off very recently, said Tang.
"In 1992, I took my "first job after graduation with the hotel. At that time, Lijiang and Dali [today Kunming's most famous tourist attractions] were not known by the outside world. They were not convenient to get to. But two or three years ago, the business environment became completely based on the tourist industry."
That industry continues to thrive and grow, especially as rural regions of Yunnan province become more accessible, and as Chinese people travel through their own country more frequently.
But for Kunming, the growth in tourism is yesterday's news. Nowadays, there is plenty of other business coming to the city, much of it from foreign companies. "Fifty percent of our customers are from the corporate market," said Tang. "They are from banks, or here because of the industrial factories around Kunming, or they're from the government – from a lot of different companies. Some have a branch subsidiary company in Kunming or do business here."
Tang said that one of her key accounts was with a Japanese pharmaceutical company manufacturing medicine in the province. Kunming has a Chinese medicine college and an institute of botany which carries out medical research. According to state media, Yunnan's pharmaceutical industry has averaged 20% growth annually for several years. More surprising, however, is the interest banks are showing in the city. "Visiting bankers are from Chinese banks," said Tang. "They're not yet foreign. The banks are private-owned, like Minsheng and Fujian Xingye. We expect foreign banks in two or three years."
Even insurance companies are beginning to make headway in Kunming – Tang says a number of Green Lake Hotel's guests worked in the insurance business. In the last two years, credit insurance (xinyong baoxian), which protects your loan if you default on payments, has grown in popularity in the city. Over the past two years New China Life Insurance (China's fourth-largest insurer) has founded three insurance intermediaries – including Kunming New China Insurance Agency, which was founded in 2004. According to state media, it began life with a registered capital of RMB5 million (US$600,000).
"We get customers working in manufacturing too, and in logistics – logistics is a new field," said Tang. "Plus luxury goods – luxury products are also really taking off. Kunming people are shopping a lot – they know how to live. Maybe someone here has 100 yuan, but he'll happily spend 99. Another field is cars – Chinese like to buy cars. Every two months we have a product lunch about cars. Then there's the supermarkets – Carrefour is here, Wal-Mart too, and there's others," said Tang.
In some sense, then, Kunming is already banking off its minorities for tourism, its climate for lifestyle, its flora and fauna for pharmaceuticals, and the happy-go-lucky, spendthrift character of its locals to grow its market. But Kunming also has location – in fact, its location makes it the obvious link to an area that is rapidly growing into one of China's key trading partners, namely, Southeast Asia.
As things stand, however, Southeast Asia is still fairly cut off from Yunnan province, which means many goods are transported by sea that should really travel overland. Landlocked Yunnan has a railway density of 59.4 kilometers per 10,000 square meters, according to a November 2004 report by Hong Kong's Special Policy Unit. That is the worst coverage of any of the nine pan-Pearl River Delta (pan-PRD) provinces, and less than half that of the coastal provinces of Fujian or Jiangxi, of Hunan, or of Hainan island. Yunnan, like neighboring Guizhou and Sichuan, is in serious need of more railways. The province has 166,133 kilometers of highways, or 9.2% of China's highways, but only 0.64% of the country's expressways – that also needs to increase if Yunnan is to develop like China's eastern regions.
Admittedly, there has been some progress. Ten railway routes currently link Kunming to other parts of the country and Kunming's rail links to Chengdu, Neihe, Guizhou and Nanning have all been electried. Expressways and highways are under construction linking Kunming to Chengdu and Yibing. Renovation of roads from Kunming to Shuifu in the north and to Sichuan in the west will finish in late 2007 – the most difficult (Kunming to Zhaotong) will be an expressway.
Last year Kim Haksu, executive secretary of the United Nations Economic and Social Commission for Asia and the Pacific, described Yunnan as "One of Asia's new, vibrant economic regions" at a speech in Hanoi, Vietnam. He said that Yunnan, Vietnam and Thailand had the potential to become "High flyers" in the region.
China's government has woken up to Kunming's potential too, particularly as different trade routes converge, especially the route to Southeast Asia, which has the potential to become a modern day Silk Road. In October 2004, the Chinese government "first voiced its interest in a new Kunming-Bangkok highway, passing through both Myanmar (Burma) and Laos. Officials in both Vietnam and China now talk of an "Economic corridor" linking the two countries as they grow their trade relationship – two-way trade reached a record US$6.74 billion in 2004, according to Chinese government statistics. China has lent its voice to Vietnam's application to join the WTO and the two countries plan to remove all duties on products traveling between them by 2015 – tariffs have already been cut on more than 7,000 items.
The plans for transportation from Kunming sound impressive. The US$250 million Southern Yunnan Road Development Project is being funded by the Asian Development Bank. Meanwhile, ASEAN has four projects for integrating the region's infrastructure – one of them is the Kunming-Singapore rail link. That project is under the auspices of an ASEAN special working group in which Malaysia holds the chair. Work is expected to begin in five years. The pan-Asia rail project will also see a 4,200-km line to Laos, a 4,900-km line to Myanmar (Burma) and a 5,500-km line to Vietnam.
"Kunming is just like a bridge," said Xu Yanming, projects officer at the Economic Cooperation office of Kunming Municipal Government. "You can see from its position that transportation is important. In ancient times it was important on the Silk Road and now it offers that same way into South Asian countries."
If Yunnan does provide a north-south link, then it will need investment and that is now arriving from both home and abroad. "We've got a lot of transportation projects with companies from other countries," said Xu. "France, Germany and the US all have companies involved."
Xu admits that getting to many Southeast Asian locations overland from China is not so easy – projects are still at an early stage and it is hard to come by any information.
"I think for Burma it is more convenient to get to it by sea, or of course by air. It is difficult overland," said Xu.
Mum is the word
Foreign companies are particularly cagey when it comes to logistics in China – one foreign transportation company executive described road and rail projects as a "Very sensitive area in China." All refused to talk about specific projects. Even the Malaysian government refused to be drawn on a prospective rail project linking Kunming to Singapore, a project it is deeply involved in. Certainly, the governments of Southeast Asia have every reason to support the development of rail and road links to southern China, since some of the freight currently cluttering the East China Sea could pass instead through their countries, which creates jobs and wealth. Thailand is developing the Laem Chabang deep-sea port on the gulf of Thailand with just this new route in mind.
But if a north-south artery is emerging as a new trade route for Asia, it is not doing so without competition. One country investing an enormous amount in infrastructure in the top end of Southeast Asia is Japan, part of its plan to create an east-west trade route linking Japan to India and beyond.
Japan recently gave a US$1 million technical assistance grant to upgrade the coastal transit corridor from Vietnam to Thailand. Japan lent Vietnam US$160 million for the Hy Van tunnel on the highway and gave Laos and Thailand loans of US$69 million for a highway bridge that will be ready in 2006. Japan also paid for upgrades to Danang port in Vietnam.
Japan, however grand its east-west transportation ambitions, is unlikely to thwart the north-south artery that is fast becoming a priority for China and several Southeast Asian governments. At the center of it lies Kunming, until now a city almost cut off from major trade zones and just two or three years ago thought of as a tourist site above all else. The city has many reasons to be optimistic.
Back at the Green Lake Hotel, Tang Pingli said Yunnan people had a laid-back approach to life.
"Kunming is a very leisure-friendly place and creates lazy people," said Tang. But as new railroads crisscross the region and China's development truly comes to town, that may be about to change.