My thoughts. I could be right or wrong, others will not share all my opinions.

I think that a professional IT support business with professionally qualified people is needed. Most IT support people I have met are overenthusiastic amateurs with exaggerated belief in their abilities.

There are also crooks who will take in your machine for 'needed' repair/service and swap out quality components that they then sell on.

I would see the customers for quality services being multinationals who will want/expect an SLA. Local guys generally do not offer SLAs, and service is hit or miss. But they are very cheap, as barriers to entry are low.
However, being able to get qualified technicians is a barrier to higher quality service provision, making it harder for the 'cowboys'. BUT once a guy is qualified and trained by you there is nothing to stop him running off to set up his own business.
Ideally you would need to try and set up a franchise with a multi-national service provider who is already recognised by big company clients in their home countries.

The alternative niche is the expat community who need support, but this market is small, and won't pay well. Although I am in need of some support right now.

The only other jobs I see for expats, apart from teaching, are:
Bar work
Hotel work
Relocation agent
Insurance sales/financial services.

The latter 2 only in the tier 1 cities, not Kunming.

One more thing.

If you do consider teaching in China, do an online TEFL/TESOL certificate.

They are very cheap, not too intensive, and recognised by Chinese universities. This would help you get jobs in China.

These are usually 80 hours of study in total, they are not recognised as being of much worth by many teaching professionals. They are not too intensive (easy), but they will give you a taste of what teaching English is like and give you a basic prep for your first job. And as I said, they are a piece of paper recognised in China to teach in a Uni.

Working illegally, will be on local wages. This would be unskilled work mostly and will pay about 100 bucks a month. This work, if you could find it, would also require you to speak Mandarin.

Because of your degree subject, teaching is perhaps your only option in the beginning. As you have a degree and now is the season of recruiting, you could look at teaching in a university. You will only be teaching English, but they usually pay your flight and provide accommodation in a small apartment.

If you do go this route apply now. Don't restrict your search to Kunming. Also look on eChinacities.com and asiaexpat.com. Both of which have countrywide job pages.

Then check out daves esl cafe (search online), as they have Asia wide job searches. The happiest bunch of teachers I have met seem to be in Thailand. The culture there is much more civilised even if most cities are less developed than the big Chinese cities.

As you apply also do a google search of that school, as there are some employer horror stories.

If you pick a Kunming employer you can always ask about them on this form. People will give you an honest opinion.

One of the problems, as I see it, is that for most expats our USP is most readily exploited in food or education.

Another issue is barriers to entry to a market. If the barriers to entry are low then a local can take the idea and run with it, much cheaper and they will work much more energetically than we will.
For most other enterprises that need capital, even if we have it, without a local network it is hard to get off the ground or prevent it from being 'stolen from you'. The 'black' economy is rife here and the local government does not have a good reputation in this area.

The idea about delivery is interesting, as you are serving the expat community, but it can easily be copied unless you create a cartel (Expat businesses only use expat businesses) which can be done but is illegal.

I thought about supplying organic whole-wheat noodles, as I know a reliable source (family). But transportation of the noodles 400km is not viable in the quantities I think I would sell.

Education is OK for small business but is problematic when it comes to scale up. As you scale up quality control becomes the big issue. Some of the local companies that more recently went big demonstrate this very well.

My other idea I will keep to myself, as it is viable but easily copied.

What might be useful is to create a local chamber of commerce. This way people who are already in business can share information on local regulation and enforcement practices, and strategies to deal with them. A chamber of commerce could also provide support in other areas. Providing information on how to set up a business in Kunming, and recommend/refer reliable agents and/or other support services, suppliers etc.

Just my 2cents.