Yunnan Investment Profile: Industry, Economics, and Support Policies for Businesses

March 30, 2020 Posted by China Briefing Written by Dorcas Wong Reading Time: 7 minutes

YUNNAN-CHINA-ECONOMIC-PROFILE

Yunnan, a Chinese province located in the geographical center of Asia, boasts of great biodiversity and vast reserve of natural resources, and is home to some of the nation’s most important trading routes.

In 2019, Yunnan’s total GDP reached RMB 2.3 trillion (US$320 billion), a 8.1 percent year-on-year growth rate – making it one of the fastest growing regions that year, far surpassing the national growth at 6.1 percent.

In terms of total land area, Yunnan is the fifth largest province in China and accounts for 4.1 percent of the country’s total land. A natural consequence of this is that it is a critical agriculture hub for China; its forest ecology system has an agricultural value of RMB 255.2 billion (US$36 billion) in 2018.

While its traditional industries, such as mining, agriculture, and trade continue to thrive, a gradual shift towards digitalized and green industries is underway – opening up more avenues for investment in the region and spurred on by a whole array of new favorable policies, projects, and incentives.

In this article, we offer a snapshot of Yunnan’s economic profile.

Yunnan economic profile: Quick facts

GDP: RMB 2.3 trillion (US$320 billion) (2019)
Capital City: Kunming
Province area: 394,000 km2
Population: 48.3 million (2018) (US$6.8 million)
Borders: Guangxi, Guizhou, Sichuan, Tibet, Vietnam, Laos, Myanmar (4,061 km with neighboring countries)
Minimum wage: RMB 1350-1570 p/m (US$190-221)
Total investment value (2018): RMB 807.7 billion (US$113.8 billion)

Geographical and regional significance

Within China, Yunnan plays a key role in city clusters – the Pan-Pearl River Delta (PRD), Greater Mekong subregion, Southwest Economic Circle, and City Circle in Central Yunnan.

Moreover, given its geographical position at the center of Asia, Yunnan acts as an important gateway to the China-ASEAN Free Trade Zone and frontier zone for West Asia, South Europe, and Africa.

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Within China’s Belt and Road Initiative, Yunnan is home to key road and railway links to South and Southeast Asian countries, such as Laos, Vietnam, and Myanmar via the China-Myanmar-Bangladesh-India Economic Corridor.

In 2019, the National Development and Reform Commission launched the Policy Measures for Accelerating the Development of Yunnan into a Regional Hub Reaching Out to South and Southeast Asia, aimed at promoting further cooperation between Yunnan and its neighboring countries in areas of agriculture, infrastructure connectivity and capacity, trade, finance, and culture.

Yunnan currently has 11 bilateral cooperative mechanisms with nine countries and 30 commercial representative offices out of mainland China, with its trading partners coming from 206 countries and regions. In 2018, the provinces’ foreign trade imports and export volume totaled RMB 197.3 billion (US$27.8 billion).

Along its 4,060 km borderline, the province has 25 border crossings and over 100 terminals that are open and accessible to foreign traders via land, water, or air transport. It is the most water-rich province in China – possessing 14,200 kms of inland waterways out of which 8,000 km is navigable. The province is currently developing over nine shipping lines and 12 ports that will establish an integral water transport corridor – connecting northward to Yangtze River, eastwards to Pearl River, westward to the Indian Ocean, and southwards to the Pacific Ocean.

Economic and industry development

Traditionally, Yunnan has eight key industries, these are:

Modern plateau agriculture;
Cultural tourism;
Modern logistics;
Information technology;
Biomedicine and healthcare;
Foods and consumer goods manufacturing;
New materials industry; and
Advanced equipment manufacturing industry.

In terms of industry breakdown, Yunnan is still predominantly run by primary industries with the combined added value at RMB 30.4 trillion (US$4.3 trillion) – a 5.5 percent increase year-on-year. Tertiary industries also experienced an 8.3 percent year-on-year growth but recorded a lower total value of RMB 12.2 trillion (US$1.7 trillion).

The success of many of its traditional industries, such as new materials, food and consumer goods, biomedicine, and agriculture stem from the province’s rich and vast reserves of natural resources.

Yunnan possesses the country’s largest deposit of aluminum, lead, zinc, cadmium, and tin well as high reserves in copper, iron, coal, gold, silver, sulfur, and nickel. The potential value of the proven deposits in Yunnan is approximately RMB 3 trillion (US$420 billion) – 40 percent of which come from fuel minerals, 52.7 percent from non-metallic minerals, and 7.3 percent that comes from metallic minerals.

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Yunnan also produces an impressive array of agricultural products over an arable area of 7.34 million hectares.

Under the government’s five-to-10-year plan, Yunnan aims to transform the production of three Yunnan specialties (tea, flowers, and pharmaceuticals), three forestry specialties (wood products, wood oils, and edible mushrooms) and four highland specialties (fruits and vegetables, highland potatoes, highland sweet wine, and highland fishery and husbandry) into world-class enterprises offering convenient, safe, and functional products.

Owing to its central position, much of the natural commodities are traded both domestically and internationally to South, Southeast, and Western Asian markets along the Belt and Road Initiative. In 2018, Yunnan’s import-export value totaled US$28.76 billion, a year-on-year increase of 24.7 percent.

Services such as logistics, information technology, healthcare, and tourism also play a key role in Yunnan’s economic development and are undergoing significant transformation guided by the government’s infrastructure upgrades, digital transformations, or green development projects.

For example, in 2018, Yunnan launched a smart platform for holistic travel called the “Yunnan All-in-one Tour app” – a one-shop-stop portal for tourists to find and satisfy their food, accommodation, transportation, recreation, and shopping needs while in Yunnan. This same year, Yunnan witnessed a 22 percent revenue increase in tourism, totaling RMB 845 billion (US$119 billion).

Government policies, projects

President Xi Jinping’s visit in 2015 marked a significant turning point for Yunnan. Guided by the Vision and Actions on Jointly Building Silk Road Economic Belt and 21^st Century Maritime Silk Road, Yunnan has undergone a series of transformations that have revitalized and modernized its traditional industries and sectors – repositioning itself as a regional and ecological hub.

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In 2018, Yunnan introduced a total of 14 industrial projects worth RMB 1 billion (US$140 million), and signed strategic agreements with Huawei, CRRC, Jingrun Huachuang Tech, and Beijing University of Chemical Technology.

Alongside this, Yunnan has undergone industrial transformation on a mass scale – upgrading to smart manufacturing equipment and undergoing a new round of 1,000 technological transformations. The clustering of leading projects helps drive Yunnan’s manufacturing industry to become smarter, greener, and more service oriented.

In the same year, Yunnan also pushed ahead with its “Digital Yunnan” plan, in a bid to shift towards a digital economy and become more attractive to South and Southeast Asian businesses. Central to this plan was the new “All-in-One’ mobile app that offered an easy centralized system providing access to tourism, government, and agricultural e-commerce services.

Green development is at the heart of Yunnan’s industry transformation and is supported by three key areas of development:

Green energy

Launching the integration of hydropower production with the processing of aluminum and silicon for automotive manufacturing, new materials, and other uses.

Green products

Further strengthening organic production and local brand building of products, such as tea, flowers, vegetables, traditional Chinese medicine ingredients, walnuts, beef cattle, fruits, and coffee.

Healthcare and tourism

Facilitating the integrated development of Yunnan as a destination for a healthy lifestyle under the pillars industries of biomedicine, healthcare, and eco-tourism industries.

What are the incentives for businesses?

In more recent years, an increasing number of Fortune Global 500 companies have set up operations in Yunnan, including: US’ GE Healthcare, Germany’s Bayer, and Netherland’s Royal Phillips besides domestic companies like Fosun, Baoneng, Hyaweu, and the Poly Group. To continue this trend, the government has rolled out the following policies to encourage more investment into the region:

Incentives for innovation and entrepreneurship: A grant of up to RMB 5 million (US$700,000) is available within entrepreneurship parks for businesses pursuing innovative projects and RMB 3 billion (US$42 million) is allocated to financial institutions to encourage them to grant credits to SMEs.
Supporting business growth: Green grants earmarked for green manufacturing systems, one-time subsidies for new investments made by green food manufacturers, and grants earmarked funds for healthcare tourism.
Lowering operational costs: Companies to benefit from a reduction of taxes and costs relating to financing and institutional transaction, workforce management, energy consumption, land use, and logistics.
Encouraging international market expansions: Eligible international production cooperation projects are entitled to a subsidy equal to 50 percent of the policy-based insurance premium from the Yunnan Provincial Department of Finance.

Yunnan’s competitive advantage and prospects

Spurred on by a series of favorable policies, projects, and incentives – opportunities for investors are growing in this region.

In 2018, the province newly signed and implemented 2,902 domestic cooperation projects, introducing funds of RMB 101.8 billion (US$14.3 billion) from outside the province, a year-on-year increase of 20 percent.

Yunnan offers three main advantages when compared to regions in China, or cities in other parts of Asia:

Its geographical position that makes it a key trading hub;
Unique and abundant natural resources; and
Rapidly transforming industries supported by government policies and incentives.

Concerted efforts have been made to shift traditional pillar industries towards digitization and green development – drawing on the province’s unique ecological and industrial advantages.

Entrepreneurs and employees alike can capitalize on the region’s business incentives and favorable working and living environment.