The financial spotlight has been shining bright on China’s big eastern cities, but as investors notice the wealth of opportunity and resources in the remote western region, the city of Urumqi is about to take centre stage.
China’s jet set will have a new playground this November when US investors open a €220m luxury resort with world-class skiing just outside Urumqi, a city that nestles in the snow-capped Tian Shan mountain range that runs between the Gobi and Taklamakan deserts in Chinese central Asia.
Once seen as distant and remote, Urumqi is being opened up by the country’s booming economy. A 20-minute drive northwest of the geographic centre of Asia, this pleasant trading city has found a new prominence as goods pass through from factories in the east of the country (and minerals and produce flow in the opposite direction).
Though predominately Han Chinese these days, Urumqi remains something of a cultural kaleidoscope sitting upon the frontiers of Han and Turkic cultures. Most signs along the broad, tree-lined pavements are written in Chinese pictograms and flowing Uyghur that resembles Arabic. Cyrillic and Roman script is not uncommon.
Tourism, just about everybody agrees, is going to be a big part of the city’s future. “Trekking and mountaineering are absolutely fantastic. Good places in Tian Shan are only an hour and half away. Motorbike tours are another fantastic opportunity,” says Jonathan Tomlin, a budding tourism entrepreneur from New Zealand who was one of the first foreigners to join theTaklamakan motorbike rally.
The high roller, however, is Thomas Ching, an American who is marshalling €220m to develop PingTian over five years, a 20 sq km all-season ski resort less than an hour’s drive from Urumqi in the Tian Shan. This November the PingTian slopes will open, which, he says, will compare to Vail and Aspen.
“The first phase of marketing will be geared towards people who can lend credibility. Once our western-based audience starts going there to validate it, it’s only a short jump for our Chinese audience,” says Ching, an avid skier who spent two decades developing steel mills and power stations in China.
Despite the chairlifts abandoned by a Chinese venture that failed on the same mountain, Ching’s confidence is unshakeable. “It’s a bold move, no question about it, but it’s not foolhardy. The allure of the area, the fact that the Chinese economy is ready for leisure and nobody is in the space now, makes it a very compelling story as long as we can deliver the quality and service.” Others agree. Suntime, a local conglomerate, is planning a resort at nearby Heavenly Lake.
Though the landscape holds much promise for tourism, traditional uses are being reinvigorated. Having a glass of red wine with dinner, for instance, is slowly becoming popular in China, which means opportunities for wine growers – Urumqi is a key wine-producing region.“Our competitors have projects for new facilities in this region.
"Foreign investment is also looking,” says Fred Nauleau, 40, a French oenologist managing the 10,000-hectare Manas winery, one of four developed in Xinjiang at a cost of 1.4bn yuan (€133m) by Suntime.Last year Suntime harvested 30,000 tonnes of grapes at Manas, which can ferment 600,000 hectolitres – six times that of a typical cooperative in France, notes Nauleau. Old traditions beat the freezing winter. “During the winter all the vines are buried under the soil. This is a traditional technique in Anatolia. Everything here is done by hand,” says Nauleau, who first arrived in 2000, staying for two years. He returned in 2004.
Producing palatable table wines is, however, the lesser challenge. “More important is marketing, it is still a very young company. There is still a lot to be done to develop the market,” says Nauleau.
Grapes are just one of the specialities behind the region’s fame for produce in China. A reputation justified by a walk past Urumqi’s hawkers with their carts weighed down by pomegranates, sultanas, apples, melons, and more. Xinjiang is China’s top tomato producer. Vast fields beyond Urumqi yield large tomatoes for pulping into purée for export to Italy and elsewhere. Cotton and wool are sent to eastern China’s rag trade.
One reason for agriculture’s strength is Urumqi’s low humidity, which can leave visitors feeling thirsty. “The weather is so dry that there are no big problems with disease on plants, so there is not a lot of need for pesticides, they just need good irrigation,” says Nauleau.
Beneath the bountiful soils lie rich mineral seams. Australia’s Apex and Canada’s Dynasty and Noranda have already turned up promising results. “By Chinese standards it’s well developed, but the companies from Australia and Canada with advanced technology see exploration opportunities here – they’ve already found gold and copper,” says Frank Zhou, 37, project manager with Xinjiang Zhongxin Resources, a joint-venture between Suntime and CITIC. “There is also big potential in mining coal.”
That could be a massive understatement. Urumqi is thought to sit on a 10-billion-tonne coal seam. There is also a good few years left in oil and gas. Urumqi Petrochemical, a subsidiary of PetroChina, churned out 38.5 million tonnes of light oil last year, a record since refining began in 1975.Windy steppes also leave Urumqi well placed to cash in on China’s goal to generate 16 per cent of energy from renewable sources by 2020.
Goldwind, a wind turbine manufacturer set up by the former managers of the government wind-turbine test site outside Urumqi, commands a quarter of the Chinese market and forecasts 4bn yuan (€381m) revenue in 2008, against 12m yuan in 2000. It plans to list in Shanghai.
“The larger part of our company is in Beijing, but the heart of our company, the research and testing of the wind turbines, is here in Urumqi,” says Erik de Vrij, 28, an enthusiastic Dutchman heading up international sales, focusing on developing countries.
He’s been struck by the changes since arriving in 2004. “Beijing is putting in a lot of money to improve infrastructure. Urumqi is beginning to take a wider outlook, looking beyond Xinjiang. The people are becoming more international, you can feel the difference in thinking between the parents and the children.”
Thriving trade in neighbouring countries plays a big part. “All central Asian countries really have is defence industries; though they are rich in resources they lack general industry. They come here to buy everything, basically,” says Zhou. He is often in Kazakhstan overseeing Zhongxin Resources’ mineral-related investment projects. “The potential in Kazakhstan alone in oil, gas and other minerals is huge.”
Trade and investment are only really just beginning. Barriers are falling. The Shanghai Cooperation Organisation, a security pact initiated by Beijing that covers central Asia and Russia, is now cooperating to stoke economic growth. China proposes a free-trade area.
Urumqi is the nexus for grand transport plans. Trial runs by freight trains from eastern China via Urumqi to Kazakhstan are clearing the way for a rail-bridge to western Europe that should move goods twice as fast as ocean shipping. Beijing plans to improve 12 roads into central Asia, including one highway aiming for Istanbul by 2010.
In anticipation, Kempinski and Sheraton have opened hotels in Urumqi. Shangri-la will open a Traders hotel next year. A new airport terminal is planned with new routes expected from Europe, the Middle East and Japan, to join non-stop flights from South Korea.
Most, if not all, foreigners find an apartment or house through friends or local office staff. Fortunately, Urumqi is a place where people are keen to help out. Tianan Mingmen is probably the city’s best central development, where a 160 sq m apartment rents monthly for 4,000-5,000 yuan (€380-€480). Next year a new housing complex should open in the commercial quarter. American developer Thomas Ching, who moved to Urumqi last October, found high-end homes selling for 4,000 yuan (€380) per sq m, compared to 40,000 yuan (€3,800) in Shanghai. He lives in a hotel while fitting out his apartment.An aiyi (cleaner/cook) will visit daily for 700 yuan (€70) a month, while a driver will expect at least 1,000 yuan (€95) per month. Fountain Plaza, the city’s best offices, home to GE, DHL and more, is on Zhongshan Road, the commercial quarter’s main thoroughfare.
Nationally, foreign and Chinese firms pay 25 per cent tax on profits. Beijing is considering incentives to stimulate investment in the western region under its “Go West” policy. Xinjiang’s autonomy means investment regulations may vary from other provinces. Xinjiang can, for example, approve land use rights, authority vested with the central government for most provinces. Investment is not as straightforward as it is in eastern cities, but it is changing. The average salary is 2,500 yuan (€240) a month, not much lower than the eastern boom towns due to a sparse population. This is growing due to government-sponsored migration from overcrowded provinces. Since the early 1990s there have been periods of unrest among the local muslim population of Xinjiang. This has been dealt with harshly by the central government which continues to impose restrictions on the activities of the muslim Uighurs.
Urumqi’s air is pure compared to the fug of Hong Kong, Shanghai and Tehran. Orderly avenues and newspaper kiosks feel vaguely European. “The greatest benefit really is the ease of living – you don’t have to take care of anything as staff salaries are affordable. The people here are very pleasant and it’s a really interesting part of China. The big disadvantage is the language – you have to speak it in these areas,” says Erik de Vrij. Ethnic strands colour life. “It is an amazing melting pot of people – Uighur, Han, Russian and Mongol. This, the landscape and the climate make it attractive, a very different place,” says Fred Nauleau.
Traditional crafts and trades endure, especially in villages dotting the steppe. Even Urumqi can surprise – for instance, an evening hawker artfully melding molten glass into tiny trinkets. “The museums are good. There is some great art and the singing and dancing is also interesting,” says de Vrij. Beyond the city lies big country. “Xinjiang is a great contrast to Zhejiang where I’m from. There are some great peaks – it’s excellent for trekking,” says Frank Zhou, a project manager.
Thomas Ching first arrived in Urumqi in June 2006. “We’ve been engaged in looking for skiing opportunities for the past two and half years, encountering various places that weren’t ideal,” says Ching. He brushes off horror stories about doing business in China. “I’ve spent the past 20 years working in China, doing business here is not terribly threatening.”
While assessing opportunities in tourism, entrepreneur Jonathan Tomlin teamed up with an Irishman and an American to open Fubar, a pub that serves as the headquarters for off-duty western executives, Pakistani medical students taking a break from their books, and English-speaking Chinese entrepreneurs eager for international flavour.
Huang Yinrong, from Zhejiang, became a billionaire from two decades of trading metals, oil and commodities between Xinjiang and its neighbours. Wu Gang, chief executive of Urumqi’s rising star Goldwind, hails from the city. Suntime is a local conglomerate to watch.
The city and its hinterland draw comparisons with Beijing or Shanghai in 1997. Quality offices are in short supply, Fountain Plaza is pretty much full. Carrefour and KFC have arrived, but as yet no Chanel or Starbucks – though the broad pavements seem perfect for vibrant street-café culture.
Light industry could thrive on local minerals, growing markets in central Asia, and lower transportation costs than factories in eastern China. More value can be added down at the farm. “There is probably good opportunity in fruit processing,” says Fred Nauleau.
“Urumqi is central Asia’s wealthiest and largest city, and what goes on close to its borders, in terms of opportunity, is the talk of the bars and hotel lobbies in this part of the world,” says Chris Devonshire-Ellis, a Beijing-based investment adviser active in Xinjiang.
The city also needs a couple of galleries to encourage local artists – contemporary or traditional – and help rekindle interest in arts and crafts, such as carpet weaving.