As ASEAN Develops, Kunming Becomes Vital Trade Link

October 3, 2008 Posted by China Briefing Reading Time: 4 minutes

Oct. 3 – Kunming is a long way from the prosperous eastern coastal regions and until recently its development has been stunted by its isolation. Foreign investors have so far been much slower to embrace the city. Even since the central government implemented the Go West policy, levels of FDI have remained low. However, all this could change as Kunming is in a position to benefit from a potentially historic opportunity. The city has been earmarked as a major commercial and financial hub for the upcoming China-Association of Southeast Asian Nations Free Trade Area. Once put into effect in 2010 the FTA will be the world’s largest, encompassing 1.8 billion people.

In addition, Kunming is ideally placed to take advantage of the increasing trade between India and China as traditionally frosty relations between the two regional giants have improved.

Kunming is one of China’s 30 second- or third-tier cities to watch in the coming five years according to the 2007 report, China 30: China’s Rising Urban Stars by real estate, by services firm Jones Lang LaSalle. The report focused on the 26 mainland cities other than Shanghai, Beijing, Guangzhou and Shenzhen that the study believes will be on the radar screen of real estate occupiers, investors and developers over the next five years.

The white paper was positive regarding Kunming’s future prospects as an investment destination, particularly for the hotel and tourism industries. However, it was rated in the lower part of the top 30 mainland cities in terms of GDP growth and concentration of high technology. The city also lagged behind most other cities when its economic development was compared with that of Shanghai. The report grouped Kunming with Guangxi’s Nanning, Jiangsu’s Changzhou, Anhui’s Hefei and Nanchang in Jiangxi as “longer term winners.”

In 2007, Kunming’s GDP hit RMB139.4 billion, showing an increase of 12.5% from the year before. The secondary and tertiary industries accounted for 46 and 47.3 percent, respectively. Per Capita GDP was RMB22,578.

Traditionally the city has relied on favorable agricultural conditions to grow grain, oil-bearing plants, and cured tobacco among others. However, the growth of advanced technologies has seen a diversification of the local economy and industries such as biotech, optoelectronics, information technology, and machine tools have contributed significantly to the cities’ economic development.

Exports, mostly in the form of tobacco, machinery, electrical equipment, and chemical and agricultural products, increased 39 percent to US$3.24 billion in 2007. Imports also increased 45.10 percent to US$3.44 billion. Due to difficulties in transporting goods out of the region levels of foreign investment are still very low although there are signs that the situation could improve rapidly. In 2007 utilized FDI was just US$300 million.

Kunming has three major universities in the city, namely Yunnan University, Yunnan Normal University, and Kunming University of Science and Technology. The city also boasts a development zones.

Located to the northwest of city, the Kunming Hi-Tech Development Zone is the only state-level high-tech park in the province with close links with Yunnan University, Kunming University of Science and Technology, and Yunnan Normal University. Investments in bio-pharmaceuticals, information technology, electronics, new materials, and optical-mechanical-electrical integration technologies are all encouraged in the park.

At the end of 2006, the zone boasted 2,600 enterprises, of which 29 achieved an annual income of RMB100 million. Ratified high-tech enterprises numbered 182. The private firms account for 80 percent of the total. Currently, 56,800 employees reside in the zone.

In April 2007, the Yunnan Branch of China Development Bank, State Council and the Management Committee of Kunming High-Tech Industry Development Zone signed a cooperation agreement making an estimated RMB2 billion worth of loans available in order to attract more overseas students to return and work in the Kunming Hi-Tech Zone. These loans aim to help solve the difficulties of overseas returned students in obtaining loans for their business startups.

The Kunming Economic and Technological Development Zone is a state-level zone that was first established in 1992, and now has a developed area of six square kilometers from a planned total of 9.8 square kilometers. It is situated to the east of Kunming, at 1,893 meters above sea-level. It is four kilometers from downtown Kunming, where the highways take you straight to the China-Laos border town of Mohan, the China-Vietnam border town of Hekou, and the China-Myanmar border town of Ruili. All three border towns are rated Grade A border ports of China.

A railroad network has been built around Kunming, consisting of the Guiyang-Kunming, Chengdu-Kunming, Nanning-Kunming, Kunming-Dali and Yunan-Vietnam railways. The zone is two kilometers away from the Kunming East Railway Station and four kilometers from the Kunming South Railway Station. Both are rail centers for cargo and passenger transportation.

The Kunming International Airport is only 1.8 kilometers away from the zone. It operates eigth air routes to overseas airports such as Singapore, Rangoon, Kuala Lumpur, Seoul, Osaka, and more than 70 domestic routes to Hong Kong Macau and other cities.

The zone has access to ocean shipping at the Beihai and Fangcheng Ports in Guangxi province via the Nanning-Kunming railway, at Zhanjiang port of Guangdong province via the Guiyang-Kunming railway, at Shanghai Port, and at Haiphong, Vietnam via the Yunnan-Vietnam Railway.

Its pillar industries include the tobacco and related industries, IT and electronics manufacturing, bio-pharmaceuticals, food processing and the new materials development industry.

Authorities encourage investment in industries, such as integrated optical-electric-mechanical, bio-food and bio-pharmaceuticals. Greater efforts will also be made for the development of industries, namely information electronics, high-efficiency agriculture, new materials, new building materials and environment-friendly technologies.

At present, a total of 128 enterprises and projects have been set up in the zone with a total investment of RMB4 billion, including 34 foreign projects with a total investment of US$164 million. Five projects established in the zone have an investment of over US$10 million each, including Yunnan Kunlene Film Industry Co, the largest solely foreign-owned enterprise in Yunnan, Kunming Molins Tobacco Machinery Co, the first Sino-foreign joint venture in the Chinese cigarette machinery industry and Yunnan Yunhui Freight Co, the first Sino-foreign transportation enterprise in Yunnan province.

This article was aggregated from the forthcoming China Briefing Regional Guide to the West China, which will be available after the National October Holidays, priced at US$25 plus p&p. The book details the provinces of Gansu, Ningxia, Shaanxi, Sichuan, Qinghai, Tibet, Xinjiang and Yunnan, and the West China cities of Chengdu, Chongqing, Kashgar, Kunming, Lanzhou, Lhasa, Guiyang, Urumqi, Xining and Yinchuan. Pre-publication orders can be made through sales@china-briefing.com.