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2012: Three game-changers for Kunming

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A view from the roof of Changshui Airport
A view from the roof of Changshui Airport

Kunming's push toward becoming a developed international city dates back to the late 1990s when large-scale demolition, construction and road-widening projects set the tone for the following 10-plus years.

Assuming that predictions of an apocalypse in 2012 are erroneous, Kunming is preparing for three major developments in the coming year, all of which should have significant impact well into the future.

Increased connectivity will be the dominant theme in 2012. This includes connectivity within Kunming, connectivity with the outside world and connectivity with global financial markets.

Here's a look at the three upcoming developments that should leave us looking at a very different city at the end of 2012:



Kunming's urban light rail network
However you get around the city, it's difficult to avoid the construction, disruption and rerouting that centers around the full-speed ahead preparations for Kunming's urban light rail, which was first announced in 2008.

Kunming's upcoming light rail network is scheduled to launch initial operations in June, with a southern section of Line 1 to debut first, and additional stations being added northward as they become ready. This first phase will initiate the process of bringing Chenggong New Urban Area into the Kunming fold in earnest.

For many Kunming residents Chenggong feels far from the city, but by greatly reducing the time it takes to get from Kunming's four main urban districts to Chenggong, where much of the government and education infrastructure has been relocated, the city will effectively be adding a fifth major district.

Subway construction on Beijing Lu
Subway construction on Beijing Lu

A new streamilined connection to Chenggong will also facilitate commuting between "old" Kunming and "new" Kunming. Many residents who work in Chenggong but prefer to live in Guandu, Panlong, Wuhua or Xishan will no longer need to spend time stuck in traffic in the city's south or rent a second apartment in Chenggong.

Alternately, people who want to live somewhere cheaper and less congested but keep their job within the traditional confines of Kunming should also benefit from being able to move to Chenggong.

For many Kunming residents, the idea of moving to Chenggong may seem unlikely right now, but it doesn't take much imagination to envision a scenario that parallels the development of Shanghai's Pudong district over the past decade.

In 2000 few Shanghai residents were willing to relocate across the Huangpu River to Pudong, but the convenience of Line 2 and the steady increase in food, drink and entertainment options in Pudong, combined with more and more businesses establishing operations there and a total of five metro lines crossing the river, has led to Pudong no longer feeling remote.

It's far from a done deal, but it does seem likely that in the coming years your friends, hangouts and even your job may gradually migrate south to Chenggong.

Of course, the new metro network (click here for a look at proposed stations) is not just about connecting Kunming with Chenggong, it's also about providing a much-needed alternative to the city's increasingly congested streets. Ideally it will not only facilitate rapid travel around Kunming for residents who don't own cars, but will also lead to local car owners leaving the car at home more often.

Looking beyond next year, the light rail network will streamline getting around in Kunming, linking the city's four long-distance bus stations, the current train station, the new train station under construction in Chenggong and the new airport, which will also debut next year and is our next stop as we travel into the city's near future.



Kunming Changshui International Airport
To understand the significance of the gateway role Kunming is expected to play for China in the coming years, one need look no further than the long-awaited Kunming Changshui International Airport.

For a city that in recent years has only been noticed by the rest of the world for having China's largest dwarf theme park and a few fake Apple stores, the new airport should increase business and leisure travel to Kunming. Naturally, popular destinations around Yunnan will also benefit.

The new airport, which is expected to debut in January, will have two runways long enough to handle the largest passenger airliners operating today. As of April 2011, around 14.8 billion yuan (US$2.27 billion) had been spent on the airport's construction.

Some portions of Kunming's current airport, Kunming Wujiaba International Airport, date back more than a century. The airport, most notable for serving as a crucial base for the Flying Tigers in the 1940s, is operating near capacity and unable to serve future demand for flights to and from Kunming.

Wujiaba Airport handled 20.2 million passengers in 2010, seventh in China, but a fraction of what is expected for the future. Official projections have traffic hitting 38 million passengers in 2020 and well beyond that afterward.

Where will the people come from? According to industry news source Anna.aero, nearly 95 percent of last year's passenger traffic was domestic, and there is little doubt that domestic business and leisure travel to Kunming will increase with the opening of the new airport.

But international connectivity is most likely to be the real story with the new airport. A major increase in flights to Southeast Asia and South Asia seems certain, and there have been rumors in recent years of Kunming's first direct air links to Europe, Australia and even North America.

In addition to passengers, plenty of cargo should be crossing borders via the new airport. A 160-square kilometer airport economic zone is being built to handle the flow of goods in and out of Kunming, with much of that trade expected to be international. The increased trade taking place in Kunming due to the airport should put the city firmly on the global economic map.

Changshui Airport's construction has not gone as smoothly as it could, with two high-profile accidents, including one in which seven laborers died, affecting progress.

The airport's location 30 kilometers northeast of downtown Kunming will also present travelers with new considerations when considering how to get to the airport and when to leave.

Instead of slogging through traffic to get to an airport within the city, travelers flying out of the new airport will need to take a much longer taxi ride than before. It seems possible that many taxi drivers will be uninterested in taking passengers that far out of town with no guarantee of returning to the city immediately.

Eventually the new airport will have its own line on Kunming's light rail network, but in the years between then and now, frequent shuttle buses between downtown Kunming and the new airport would seem to be a likely way of dealing with getting passengers to and from the airport in an efficient and cost-effective way.



The Pan-Asia Gold Exchange
The third big development that should shake things up in Kunming is the relatively unknown and little-understood Pan-Asia Gold Exchange (泛亚黄金交易所), which is expected to launch gold trading by June.

Upon visiting the exchange's headquarters, we found that details regarding what services PAGE will offer, who it will work with and when it will open are still unclear. But that hasn't kept it from raising eyebrows in New York and London, the global gold trading centers.

What is known at the moment is that PAGE intends to offer gold contracts to individual buyers, some for physical gold, some for paper. It also intends to work with China Agricultural Bank to offer the bank's 320 million account holders the option to purchase to gold contracts online.

Center of speculation: Pan-Asia Gold Exchange's headquarters in north Kunming
Center of speculation: Pan-Asia Gold Exchange's headquarters in north Kunming

China already has gold exchanges in Shanghai and Hong Kong, but the proposed Kunming exchange has raised eyebrows in the world of precious metal trading. London-based analyst Andrew Maguire recently declared that PAGE will "destroy gold and silver shorts", adding:

"China is keen to diversify their cash holdings and is also encouraging citizens to make investments in gold and silver. The Pan Asia Gold Exchange is another step in this direction by opening up ease of access to physical gold and silver to their bank customers. This physical backed exchange is going to be a big game-changer.

Just look at the scale of this to get an idea of how massive this game-changer will be, The Agricultural Bank of China has over 320 million retail customers and 2.7 million corporate customers and has integrated its customer account information system with this platform.

By creating the first ever rolling spot contract, Chinese bank customers will for the first time have ease of access to 10 ounce gold contracts in Renminbi directly from their bank accounts and with the click of a mouse. To give a further idea of scale, if just 1% of their customers bought a single 10 ounce contract, that would equate to 1,000 tons of physical gold being drawn down.

Robert Lenzner at Forbes has also weighed in on PAGE, in a rather alarmist blog post entitled "The Chinese Mean to Control the Global Gold Market", in which he says the Kunming exchange sounds "bloody dangerous".

Regardless of how accurate Maguire or Lenzner's assessments are, it does seem likely that after losing out big through its purchases of US Treasury Bonds, China is looking at entry into global gold trading as a hedge against a weak dollar and a way to stabilize its portfolio.

Whether PAGE will actually do this remains to be seen, but given the "Pan-Asian" aspect of its name and the decision to base the exchange in Kunming, it would seem that Chinese buyers are not the only target market. If the exchange successfully courts Southeast Asian and Indian buyers of gold-denominated yuan, Kunming's aspirations to become a regional finance hub may come to fruition.

However things work out, 2012 is already shaping up to be an interesting year for Kunming.

Changshui Airport image: Wikipedia

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According to this report, there will be four runways and an eventual annual capacity of 68 million travelers, with total investment at US$3.6 billion.

Excellent update, Chris.

All of these issues are wide-ranging and far-reaching in scope. The transformation of the city over the last few years has been staggering to my eyes, which are accustomed to the slow crawl of change over time witnessed in the U.S.

The greatest, "on the ground" issue is whether public transportation will actually be successfully sold to the car-crazed citizens of Kunming. Will light rail actually "lead to local car owners leaving the car at home more often."? Owning a shiny new vehicle and driving it around for no reason seems to be the endgame of working long hours for 6 days a week for the average Chinese breadwinner. Sitting in your living room away from home in congested traffic with your wife and child in tow with climate control and surround sound stereo is the new daily diversion.

Will the rail system be able to accommodate the kind of volume that might hit the system if such a large percentage of KM'ers have their jobs moved to Chenggong? A longer commute might be just the justification for people to use that car more often.

If folks really do use their new cars mostly for functional purposes and if they actually do decide to leave the new love of their life at home, where are they going to "leave" these cars? Sidewalks are the new parking zones. 2-lane roads are now parking lots lining narrow one-way alleys through which cars, e-bikes, bicycles and pedestrians all need to navigate. Let's hope these are just symptoms and growing pains associated with "development". The government is good at implementing sweeping changes with the wave of a hand, as evidenced by the rate of construction and destruction all over town. I say, tax the hell out of gas and new car purchases and turn some of the high rise development projects into parking garages, sold for a premium to the "shadow rich".

I dont expect too much from the metro - one line makes not much difference, the whole network will be needed to really make an impact on the cities streets.
Till then the car craze will go on and only the few points along the open rail line may see a limited impact. This impact will mainly fueled by reduced busses or MianBao transports, as these may use the new system if faster, convient and most importantly CHEAP!

Lets see how they price the metro system. Based on what I read, hear and see Kunming City is close to bankruptcy and runs lots of Special Interest Entities to obtain loans and fund the ongoing developments. These entities may be tempted to get a fast return on investment, resulting in crazy pricing. Lets see.

For the airport: expect to see outreagous prices on taxis and lots of scams. The Taxi management at Wujiaba Airport is already one of the worst I've seen in China - so with bigger distance and higher stakes at play I expect this to increase drasticly.
It was said operation starts in January...I hope not before Spring Festival - that would be crazy, if I have a choice I would avoid flying for a period of 2-3months to get the things sorted out first.

Actually - I was thinking it would be cooler to make the car park garages subterranean (with electric charging stations), along with a mandate that all taxis and buses migrate to propane, electric, and or CLEAN diesel (like Tokyo) - otherwise we'll have a smog/traffic induced ecological nightmare. We're already at 2km altitude - we really don't need the ozone thinned out by even a fraction of 1%.

I suspect the car ownership face thing will continue the increase of cars in the city. The government will eventually start tolling people through high parking charges and the like to discourage it, it won't happen overnight but it will happen just as it has in *insert name of any big city in the world*.

I think Kunming will be an interesting case for the subway vs face value of cars. Kunmings streets aren't really that congested (have you been to Malaysia/Jakarta?) and the majority of workers don't appear to have cars yet. To be honest, I think the subway here is coming in before its really needed. It will be VERY interesting to see if the middle classes that have been aspiring to own a car will continue to aspire to stupidity when most of the subway system kicks in, i.e. once they realise that a car is not needed, is a hassle and a waste of money. One thing I know about Chinese is they are mostly financially savvy, which means they think about where to put there money more. They also care less about personal space than us so a squashed subway is less of a problem. And when they realise they can get from one end of Beijing Lu to the other in 10-15 minutes on the subway or 40 minutes in a car...

Regardless, the majority of the population here has never used an MTR system before, so the first few months of operation will be filled with hilarity I am sure!

I am almost sure the local govt will put a good bus route through to the new airport. Thats the way I will get there, probably by taking a taxi to the last bus stop in the city and then catching it to the airport. Might cost 2 kuai but its better than the 40-50 default charge that most taxis will probably quote...

I'm not sure I understand what PAGE actually is supposed to do. Can someone gist me in nong min terms?

I've actually been excited about the idea of a new modern international airport for quite some time but now I'm actually hoping it won't actually open on time as I have a short trip back to Kunming (I'm usually only in Yunnan about six months out of the year, this is a random short visit) of about ten days in March and don't really wan't to deal with traveling to and from the new location twice in such a short time period. If I was around for my typical long term stay it wouldn't bother me so much.

ok blobbles,you want to know why they need to activate the light rail way(subway) system so badly?
Well,here is the answer:political achievement
The third ring has been accused has Quality Issues due to a rush for quick results,because it was a "gift" for National Day.They keen to get political achievement.
also rumours said the poor quality shade tree from Kunming to chengong were bought from the former municipal party secretary Qiuhe's relative from Jiangsu province.Someone made butt-load wealth from this...
Now Qiu is the Deputy Secretary of Yunnan Provincial Committee of Communist Part(future nomarch?)
so,once this subway system works,he surely will be the governor.

surreptitious competitions are among all provinces in this country,that's why those skyscraper and fancy goverment buildings were built and keep building...

This is how Chinese goverment system works and why.

Political achievement or not, Kunming must be one of the only cities in the world that is getting an MTR before it is drastically needed. And poor quality shade trees? I aren't too sure where you are looking but they seem fine to me...

Wether or not they are corrupt, the projects benefit the people first it seems. Unlike other places where projects would be populist or for the elites only...

er...ok,I am just explain the why the subway here is coming in before its really needed.
have you ever heard the erosion of state assets?Chinese doosi hafan transfer the fisk fortune to their wifes and kids abroad?
Do you know lots of Chinese celebrities are not even Chinese now?

and you still doubt about this political achievement&corruption,fine,you will see the dilapidation of China when it comes.

Well if it is because of political achievement, then the urge to achieve political achievement has put into place good works. Ergo: whoever holds the strings of these political achievers has found a way to incentivise officials to think what could make a city better before it's actually needed. The goal justifies the means. Okay, it should also be re-evaluated to eliminate quality erosion.

The Pan Asia Gold Exchange, when launched, could have a major impact on the global gold market, other than just reinforcing Kunming and China as financial forces to be reckoned with. See, if as Mr. Maguire suggests, indeed 1000 tonnes of gold will be sold to Chinese people, this will make the price of gold skyrocket. It also means that people who short gold (i.e. they borrow gold from someone who has some, sell it for 100 dollar an ounce, anticipate a price drop and buy it back for 90 dollar an ounce). Net profit: 10 per ounce. These shorts make the market unstable and undermine the position of gold as a money reserve in bad financial times (like, now).

Other things come into play: the increased opening of the RMB to foreign investment (since foreigners will be able to sell gold to Chinese people in return for yuan!) and the fact that there will be a shift in financial power, away from the LBMA (London Bullion Market Association) and the COMEX in New York. This would bring balance and free market workings to the bullion market.

There may be many other things that could ensue from the launch of PAGE. It's hard to oversee the changes that may be brought about and the bigger financial and political picture. However, if it launches the way analysts think it will, now may be a good time to buy gold.

central government are fooling by local government all the time,I have friends who wrok at the government in chenggong.I believe its true.

Thank you - this is one of the best written articles on GoKM I have read and helps to understand the potential of KM!

Regarding PAGE, the significance is that China holds one of the largest reserves of gold in the world and much of it is located here in Yunnan and surrounding areas. In times of economic recession / depression many investors turn to gold - in 2011 gold raise ~10% in value.

While many people are becoming rich in KM, primarily due to RE, it still has a long way to go before it is an accepted international business center.

Jonathan

oh yeah - re the MTR - if you think queuing for a train in BJ, SH, etc. is challenging wait to see what it is like in KM ;-)

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