Despite its location in the Chinese hinterland, Kunming is poised for explosive growth over the next 10 years. If its development strategies are successful, the city will become one of the most important trade and economic hubs in China and Asia.

Introduction
Since the launch of the Chinese Communist Party's 'open and reform' policies in 1978, China's economy has grown at a rate and scale unseen in human history, averaging more than 8% growth over almost three decades.

The benefits of this economic progress have not been evenly distributed, with China's coastal region getting a bigger slice of the pie than western China.

What has this meant for Kunming? Because of its remoteness, Kunming has been an economic backwater for most of the last three decades. That was before rapid growth in China's trade with Southeast Asia and China's domestic tourism industry in addition to Beijing's 'Go West' initiative aimed at increasing domestic and foreign investment in western China.

Positioned for growth
Kunming is currently being groomed by provincial and national leaders to serve as a main commercial and financial hub for the upcoming China-ASEAN (Association of Southeast Asian Nations) Free Trade Area (FTA). China and the ASEAN member countries signed an agreement this year for the 1.8 billion people FTA, the world's largest, which will go into effect in 2010.

Infrastructure improvements already underway are indicative of the expectations Beijing has for Kunming's near future: Kunming will have a new airport in 2008 that will be China's third-largest, a highway is being built to connect Kunming with Singapore, rail links connecting Kunming to Southeast Asia are being built or expanded and most recently it was announced that India and China are going to rebuild the Stilwell Road, which will connect Kunming with Ledo in northeast India's Assam state.

In a few short years, Kunming will have direct land links to Singapore, Bangkok, Kuala Lumpur and Hanoi. It will also be the only Chinese city with a land link to India, one of China's fastest growing trade partners.

Those are just the biggest projects. A citywide road improvement project is underway. Kunming, which is currently comprised of four urban districts inhabited by five million people, intends to add two new districts and grow to eight million by 2010. There are going to be significant opportunities for foreign businesses should this ambitious plan come even close to being realized.

Foreign investment now welcome
Kunming used to be one of the more difficult major cities in China for foreign businesses to invest. Getting things done in Kunming is still not as easy as it is in Shanghai or other boomtowns in China, but the city's momentum is aimed in the right direction. Just a few years ago, foreign companies (especially small- and medium-sized enterprises) looking to invest in the city faced numerous obstacles which made it appear that their presence was not necessarily a priority for the city.

The last few years have witnessed a growing keenness on the city government's part for foreign investment, even on a relatively small scale. Not long ago one had to have quite a bit of money to get enough attention to register a company in Kunming. Today the city has granted wholly foreign-owned enterprise (WFOE) to foreigners investing as little as US$35,000. WFOE status allows foreigners to operate in China without the previously required joint venture partner.

Today, the Kunming municipal government realizes the importance of foreign investment to the city's growth. That's not to say that setting up a presence in Kunming is an effortless endeavor, there's still a lot of red tape and running around to different municipal bureaus.

One of the main difficulties in dealing with the municipal government is the mixed signals given by the myriad bureaus that often seem to lack in interdepartmental communication. This is being addressed by a consolidation of government offices now underway.

Challenges
The future is looking quite positive for Kunming, but there are numerous obstacles to the city's ascendancy. As with most Chinese cities, power is an issue. Kunming is surrounded by one of China's highest concentrations of hydroelectric power, but much of it is sold to Hong Kong and Guangdong province -at an artificially low rate.

Traffic is the other major obstacle to Kunming's development. Kunming's registers around 200 new private automobiles every day, yet the city's traffic infrastructure has changed relatively little in the last five years. The way things stand now, it's easier to get around town on a bicycle than in a cab. There is talk of an elevated rail, but that is years away.

These challenges are vexing, yet they pose opportunities for creative outsiders. It is arguable that companies dealing in solar panels (much of the city uses relatively outmoded solar technology), traffic management or rail transport have a major opportunity at this point in Kunming's development.

This information was provided by Meridian Consulting Kunming. Click here for more info.