Where I’d Head Now If I Was A New Expat In China: Urumqi

August 21, 2012 Posted by China Briefing Reading Time: 6 minutes

Op-Ed Commentary: Chris Devonshire-Ellis

Aug. 21 – Twenty years ago, as weird as it may seem today, no one wanted to be posted to China. The country, still fresh from the Tiananmen incident, was something of an international pariah, and trade was only just beginning to pick up. No one was sure which direction China would take – retreat back into a closed shell, or reform and develop. While the answer now is obvious in terms of what happened, back in 1992 much of China was still waiting to be discovered, and expats were rather thin on the ground.

Someone visiting Wuxi, for example, would be greeted as a seasoned traveler upon their return home and as someone who would take risks and seek adventure. Twenty years ago, nearly all of China was like that – mysterious, romantic, and full of the allure of the ancient orient. Today, China is full of expats and businessmen, and many have traveled around with the mantra: been there, done that. Yet growth today is not necessarily in the obvious cities. With two airports, a maglev, and miles of highways, bridges, buildings, and port facilities, Shanghai as a contemporary city is built out. All that remains in terms of business opportunities there are the service industries – selling to the city’s inhabitants. Even manufacturing is long gone, pushed out to less romantic, yet far more cost-effective destinations such as Ningbo, Hefei and Yiwu.

It’s the same story in other primary locations too. Beijing is slightly different due to its status as a national political capital, but cities such as Guangzhou, Shenzhen and even Wuhan and Chengdu are being finished off, nothing left to develop now except a sales market. Not that that’s a bad thing – Chinese consumerism is expected to turn sharply up, especially in the third and fourth-tier cities where the newly established middle class want to acquire Nike shoes, LV bags, iPhones, and drink coffee at Starbucks.

But the true prize, in my opinion is even larger: Central Asia. I’ve just returned from two weeks travelling across Mongolia, Inner Mongolia and Xinjiang, assessing just how far these regions have come and how they are poised to develop. Mongolia as a country has just been rated one of the top investment destinations for the next 10 years by Global Finance Magazine, and of course we have already set our stall out there concerning monitoring the country through our Mongolia Briefing facility. As concerns more general investment potential though, the country is limited to expertise in mining, and remains currently a big-ticket destination for investment dollars. Central Asia is a different matter. Comprising a huge area, the region is not officially defined, yet certainly includes Kazakhstan, Kyrgyzstan, Uzbekistan, Tajikistan and Turkmenistan. Add to these a looser definition of Central Asia and you include Afghanistan, Pakistan, Mongolia, Tibet and Xinjiang Province. There would be some mileage in stretching the region to include Iran as well, in addition to parts of Russia’s Siberia. But the principal financial, communications and logistics hub servicing all of that? Urumqi.

Xinjiang also offers the romance that I loved about China 20 years ago – the exploring of the unknown. That’s something I still fund over at our China Expat site, and I still enjoy traveling around the country. But Xinjiang is special, if just for three words only: The Silk Road. The Urumqi warehousing and free trade zone is full of lorries bearing exotic destinations; drivers here regularly head off across the Tian Shan and the Pamir Mountains to Kabul, Almaty, and Gilgit. Add in the famous cities of Bishkek, Samarkand and Kashgar, and a typical cluster of Chinese cities such as Chongqing, Tianjin and Wuhan as examples sound positively dull by comparison. In terms of oriental romance then, Urumqi fits the bill.

Concerning commerce, Xinjiang has its own, distinctive flavor – and its own distinctive problems. Unrest rears its head from time to time in Han-Uyghur conflicts, and there remain some obvious areas of discrimination. Yet the Chinese manage to keep a lid on the region, and the communications and transportation to allow them to do so are also being improved – the main rail line to Kashgar has now been extended as far as Khotan, and the express Beijing-Urumqi rail line – crossing both the Gobi and Taklimakan Deserts at impressive speeds – will open in 2015. Another route is possibly penciled in to link Urumqi to Lhasa via Khotan, although at present that can be accessed with relative ease from Golmud.

The Chinese strategy for asserting security over the region is quite simple: improved communications and wealth creation. That extends to China assisting other neighboring countries with their own rail projects to link into the China network and to increase bilateral trade – feasibility studies are being conducted to create a spur from Kashgar down to Islamabad in Pakistan, as are studies on a potential route across the Wakhan Corridor to Kabul. Lines already exist between Urumqi and Almaty and beyond. The Kabul line especially is likely to happen sooner or later, I know several expats based in Ulaanbaatar currently out surveying the Hindu Kush and elsewhere for minerals and energy reserves. Afghanistan as an investment destination for mining corporations may sound farfetched today, but I give it five years before that becomes a serious reality. Getting the commodities out will require rail – one reason the Chinese are currently looking at that. Processing? Urumqi.

That new found wealth in Central Asia will also be centered around Urumqi – buyers already flock to the largest markets in Central Asia – Urumqi’s trade and commodities market and the bazaar at Kashgar – thousands of buyers and traders flock to the city every day. It’s an ancient scene as the Kyrgyz mix with Turks and Afghanis with Kazaks, and all to some extent, both managed and assisted by the Chinese. That ticks another box – the Central Asians are buying. Property investments in Urumqi are paying off too – a (Western) friend of mine who purchased an apartment there in 2007 has seen the price increase six-fold. I myself eyed up a US$100,000 one bed, top floor, city center apartment this past weekend. I remain tempted, and will return later in the year for a closer examination. Another box ticked – a decent enough ROI in the property sector.

Doing business in Urumqi then is a Central Asian play, and would require the ability to immerse yourself to some extent in Central Asian culture – learning Uyghur, a respect for Islam and perhaps a smattering of Russian would all help. If I was 25 years younger, looking at Beijing and Shanghai today would make me question the wisdom of trying to compete in such cities with everyone else. Urumqi, with its unique combination of difficulties, yet apparent surge towards being a serious player in the entire Central Asian economy, would appear a great alternative bet, and I’d be heading off there. There’s a bonus too – unlike the massive primary cities of China, it’s easy to get out into some spectacular countryside, and historic culture on the doorstep. The ancient ruined cities of Gaocheng and Jiaohe. The snowcapped mountains of Tian Shan – with foothills and meadows beneath that are reminiscent of Switzerland. All tied up with Marco Polo, Xuan Hang and the Silk Road. I’m not sure anywhere else in China offers such potential today as does Xinjiang, and if I could, I’d go there in a heartbeat.

Urumqi as a career move may seem off the map and unnecessary for those that prefer the easy comforts of Shanghai, but for young executives seeking to make a mark in China – Xinjiang would be an amazing destination to set up shop and go for one of the fastest growing (and culturally appealing) areas that the entire country has to offer.

Chris Devonshire-Ellis is the Founding Partner of Dezan Shira & Associates, which he established in 1992. He is about to leave China and take up a new position with the practice to head up their North American practice. The firm services investments into Xinjiang from Beijing and has a representative on the ground in Urumqi. For further details or to contact the firm, please email china@dezshira.com, visit www.dezshira.com, or download the company brochure.

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