Travels In China: Nanning To Guiyang by Mark Mobius, Franklin Templeton Investments
My team and I recently embarked on a tour of a number of cities in China to see the economic conditions for ourselves and speak with company executives about the business climate. Here is my report on the cities of Nanning and Guiyang in southeast China.
My team and I arrived in Nanning via high-speed train from Shenzhen, making a few stops along the way. We were in Nanning on the biggest Internet sales day of the year: “Singles Day 1111,” named for the 11th day of the 11th month (November 11). Singles Day is comparable to “Cyber Monday” in the United States, which follows the Thanksgiving holiday there in November. On both occasions, online merchants offer heavy discounts and promos to entice shoppers. Given the tremendous online sales push, I expected physical shopping malls in Nanning would not be doing much business. However, that wasn’t the case. I went to buy a pair of pants at the mall near my hotel and had to wait for 20 minutes in a long line of people, many of whom were simultaneously shopping on their smartphones. We learned that for one of the largest online retailers in China, mobile phone users accounted for more than 60% of sales on Singles Day in 2015. Meanwhile, some of our own analysts were hitting their smartphones and computers to get those big bargains, too!
We left the mall long after dark to find crowds outside looking at groups of dancers promoting a property development. As the women danced—dressed in uniforms with the company logo on them—brochures were handed out to the crowd. It was an indication to us of the property boom taking place in the city, and of the rather aggressive sales efforts of property development companies.
Located in Guangxi Province, Nanning is a formidable city with a population of 6.6 million, but to many travelers, it’s a stopping-off point on the way to scenic Guilin. The Chinese characters for Nanning mean “southern tranquility,” and it has been known as a “green city” because of its abundance of tropical plants. My impression was that Nanning today is more of a concrete jungle than a green jungle. Even though there are already many skyscrapers in Nanning, I counted more than 20 buildings under construction that looked to be at least 30 stories high.
Nanning is also famous as a stopping-off point for travel to Vietnam. There are plans to build a high-speed railway to the nearby Vietnamese border to better integrate the Pearl River Delta (Hong Kong, Shenzhen and other cities in southeast China) along with members of the Association of Southeast Asian Nations (ASEAN).
The morning after our arrival, we drove to a milk factory in an industrial area, passing many high-rise office and residential buildings along the way. The company’s main business is buffalo milk and yogurt in different flavors, some unusual to me, such as red bean and black bean. Buffalo’s milk is much richer than cow’s milk and therefore sells at a premium. The company’s milk distribution is comprehensive, with products sold not only through its own shops but also via sales in supermarkets, the Internet, and its own team of workers on bicycles delivering every day directly to hundreds of thousands of homes. Like many other companies in China, the company began in a traditional industry but has been branching out into unrelated areas such as media, Internet, travel and financial services.
We left Nanning in the morning for a five-hour trip to Guiyang via train. We passed farms growing rice, corn and other crops but could see no farmers. We wondered where they were. In the city?
Like a number of prosperous cities in China, Guiyang is situated on a river, the Nanming River, which is a branch of the Wu River. Guiyang is the key commercial hub of the province and a number of local and international firms have retail and wholesale operations there. Hydroelectric power plants along the river supply as much as 70% of the city’s electricity, in addition to coal-fired plants supplied by coal mined in the province.
Many high-rise apartments have been built or are under construction in this mountainous area, and I saw this as confirmation of the urban migration taking place all over China from rural areas. Similar to Nanning, I counted at least 20 high-rise apartments of about 30 stories each under construction while another 20 had been completed. While the roads in the area are excellent, I wondered whether they could handle all the additional traffic once all these new residents move in. Infrastructure building was still underway with lots of tunnels being dug in the mountainsides. While the road network was extensive, in our view there was still a lot of work to be done in terms of infrastructure and providing services like electricity to all the future residents.Our team toured a new development in what appeared to be an entirely new city in the region. It was a huge complex of 52 buildings, each 30 stories high and each with 120 apartments. The grounds included gardens, fountains and a French-style swimming pool. We looked at the costs of the units and the company’s potential profits. The developers told us their strategy is to raise prices once 60% of the project is sold.
While we’ve heard reports of falling real estate prices in some of the smaller (second- or third-tier) cities in China, we didn’t see widespread evidence of that; sales still seemed generally robust in the areas we toured. We were told most buyers in this area were not speculators—they were planning to live in the developments—and 20% were from the countryside. Two light railways are expected to connect people to the development, one direct from the old city center. Like the dairy company we visited in Nanning, housing developers have branched out in a number of other activities as well—from health care to technology to cooking oil.
Our trip included a tour of Qingyan Ancient Town, a famous historical and cultural attraction just south of Guiyang where we enjoyed its ancient architecture. Now a tourist draw, it was originally built in 1378 during the Ming Dynasty as a military outpost, and thus, was surrounded by a wall. Located in a rocky area, most buildings and walls in the town are made of stone, and the main street was flanked with various shops and restaurants selling tea, local snacks, and a wide variety of traditional goods. The many beautiful buildings there include temples and a Christian church and monastery; French missionaries introduced Catholicism to the area in 1851. We also visited the elegant home of a scholar who won the national examination during the Qing Dynasty and became a government official. He collected unusual stones from all over China, displayed in the courtyard.