Sub-tier 1 China

2016-02-25

Even with so much the sky’s falling in China” rhetoric, you’ll still find a lot of optimistic, forward-looking people here. but there’s a stark contrast between attitudes in Beijing/Shenzhen/etc and sub-tier 1 cities that urbanization has seemingly left behind.

Below are observations Chinese millennials made when they visited their hometowns during this year’s Spring Festival week (aka Chinese New Year). These were shared on Wechat a bit (unknown who original curator is). I thought it’d be interesting to translate and re-share here.

Observation of a Tier 4 Chinese city

  1. As local coal mines goes from reducing and suspending production to filing bankruptcy, their workers are first delayed and denied wages before being laid off.
  2. The local real estate market is stagnant. Ongoing construction projects are left unfinished. Completed property don’t sell.
  3. Local cigarette factories see their sales over the past year go into decline and begin to cut production.
  4. Food and fruit princes drop. So does the income of farmers.
  5. More labor sitting idle and less income for workers.
  6. Infrastructure construction continues to go strong. The business at a local stone supplier to road construction projects is flourishing.

Reflection:

  1. The energy sector, including coal and oil, and real estate sector are the first to be affected by the economic crisis. The situation continues to deteriorate, with no optimistic outlook.
  2. The reach of the economic crisis is expanding to more sectors. Even cigarette companies, which have enjoyed high profit margin, are suffering. The management pins the blame on the restriction on consumption using public funds. The restriction has been in place for a number of years, its impact is already evident from the plummeting stock prices of white liquor or baijiu manufacturers. However, during all these years, the margin of cigarette industry has remained stable. An article published last year even said that the cigarette industry was the most lucrative business in China. Therefore, what is going on in local cigarette companies is related to local economy and local income.
  3. The revenue decline of coal mines and cigarette factories, which used to be local cash cows, will trigger a series of consequences and affect the overall local consumption level. As a result of layoffs and shrinking demand, local spare labor force has grown. The income of local workers has declined due to an oversupply of labor.
  4. Infrastructure construction is the only sector holding up while coal mines, local consumption and real estate are suffering. Considering the backwardness of the local infrastructure, this sector still has room to grow, as long as investment is in place. But where does the money come from? Local government is already heavily in debt. It all comes down to how much the central government is willing to support.

Observation of a Chinese county known for tourism

  1. Local automobile part factories and steel plants close down.
  2. Heavy polluter chemical industry is doing fine, but production is limited.
  3. Advertisement agencies are doing alright.
  4. Plenty of car sales were made at the second half of 2015, with many new cars spotted on the road.
  5. Tourism industry has declining sales.

Observation of Jimo, a county-level city in Shandong Province

  1. Economy seems to be really struggling. Several large local clothes OEMs are faced with the risks of closing down. Making money is becoming increasingly difficult. So is collecting receivables.
  2. Sales are difficult to make in the real estate sector.
  3. Quality commercial property is needed.
  4. Retail sellers on Wechat are everywhere. Overseas shopping agents are on Wechat. People go on the platform to sell designer handbags from local OEMs, clothes and even vegetables and honey. It is the absolute trend. Wechat public accounts have penetrated almost every industry. For example, by following the Wechat public account of a karaoke place, people can order and switch songs on their phone. An extremely popular local account is Zhang Shang Ji Mo, a local fusion of portal website, meituan and 58.com. It is said that even some villages have their own public accounts on Wechat.
  5. Taxi hailing apps are highly popular.
  6. Traffic congestion is serious.
  7. Smog is serious in winter, but no one cares about the level of PM 2.5. No one on the street wears masks even when PM 2.5 level shoots over 300.
  8. Gyms have recently begun to grow. Whether you are a worker, a small business owner or a civil servant, everyone loves iPhone, but many of those over 40 years old use Huawei or even Oppo phones.
  9. Red packets on Wechat are all the rage.

Huainan city in Anhui Province

  1. This is an energy-sector driven city. Coal usage in power plant has plummeted. The majority of coal mines have halted production and given workers unpaid leaves.
  2. Few consumers at restaurants and entertainment venues.
  3. Local economy is gloomy.

A county (district) under a tier 3 city

  1. Many private loans have gone bad. Many borrowers have gone into hiding, which has affected companies that have backed each other’s loans.
  2. Many small factories have suspended production.
  3. Bank lending and secured loan have almost stopped. NPL ratio at local rural credit cooperatives and agriculture banks is estimated to increase substantially.

A tier 4 city in Northeastern China

  1. Factory: private steel plants have cash flow problems. Workers have not yet received their January wages.
  2. Shopping mall: shopping has apparently declined.
  3. Real estate: housing prices in premium locations are doing OK while prices in non-premium locations are down by 25%.

A Tier 1.5 city in Northwestern China

  1. Employees of state-owned enterprises have seen their salaries cut, benefits cancelled and workload slightly increased.
  2. Restaurant and tourism industry has gloomy performance. Many restaurants and luxury hotels in tourist attractions are closed. The number of foreign tourists has shrunk.
  3. Housing prices have fallen to 1,000–3,000 RMB per square meter.

A Tier 4 city

  1. real estate construction is suspended and many migrant workers are returning to their hometowns.

Taiyuan, Shanxi Province

  1. Many new roads are built.
  2. Salary at large state-owned enterprises is cut in half to around 3,000-over 5,000 at steel plants and around 2,800 at bus companies.
  3. No progress made regarding Internet +

Taizhou, Zhejiang Province

  1. One-third shoe factories are closed. Business is difficult.
  2. Private lending chain is disrupted. Many have fled.
  3. Downturn of the tertiary industry, for example, restaurant and entertainment, has accelerated.
  4. Local government begins to have fiscal problems. It is said that Wenling, a county-level city, is over 100 million RMB in deficit.

Luoyang, Henan Province

  1. Luoyang, which used to be a city of heavy industry, is doing quite a good job with transformation.
  2. Tourism is developing well.
  3. Traditional media are transforming successfully, with many cultural events held. The Internet culture is booming. Local people have strong willingness to spend money and their buying power has been greatly enhanced.

Tangshan, a Tier 3 city

  1. Very few construction related electrical works and real estate projects are starting.
  2. Quite a few steel plants have been closed, of which a few have not paid its workers. It is expected that half of the largest steel plants will be closed in the upcoming year.
  3. Cotton and corn prices are down year-on-year.
  4. Not many orders are received by machinery factories. Workers work for a few days before being put on leave again.
  5. Not many customers are spotted in shopping malls.

A prefecture-level city in Central China

  1. Government offices are moving outwards. Downtown area continues to be the most densely populated place. The old town has serious traffic congestion problem.
  2. There are at least five large shopping centers under construction.
  3. It is common for one family to own two cars and three apartments/houses. Most apartments/houses are empty. There is not enough migrant population. It’s difficult to collect rent.
  4. Most parents hope that their children can come back home after finishing university. They think it is better to be a civil servant at home than to work outside their hometown.
  5. Business at Internet cafes and cinemas is good, better than at restaurants.
  6. Many business owners go into hiding or commit suicide.
  7. Prices are high, but doing business is hard. Very few people use Didi taxi app. The taxi market is chaotic. An increasing number of people are getting double eyelid surgery or eye surgery to treat myopia.

A village in northern Jiangxi Province

  1. Many cars are running are the street, causing traffic congestion.
  2. Rural children receive low level of education.
  3. Many people run away after borrowing from private lenders.
  4. To get married in the county, one needs to have an apartment and a car.
  5. Mahjong is very popular.
  6. In a high school union, it is found that those who come from the county settle back down in the county and those from the village are now migrant workers in Beijing, Shanghai, Guangzhou or Shenzhen.

A village in northern Jiangsu Province

  1. The housing market is cooling. Urban planning changes as policy-makers change their mind. Many farmers are not very willing to invest in the stock market as the government encourages them to. Housing prices in the county have fallen.
  2. Local soil is heavily polluted. There have been more cancer patients. Rivers in the county are also heavily polluted.

Lankao, Henan Province

  1. The economic development here is pretty fast. Companies like Foxconn, GEM (Green Eco-Manufacturer) and Hangxiao Steel Structure are either building or have already built factories here. The local government is even able to select which company they would like to have here. Foxconn alone provides 22,000 jobs. There are companies there are listed on the new OTCBB and even to be listed on the main board. A high-speed rail will soon be in operation in the upcoming year. A sewage system that separates rainwater from wastewater is also under construction.
  2. There are clearly more private cars than before. It is estimated that at least half are low and medium-end cars, but there are also quite a few number of Mercedes-Benz, Audi and BMW.
  3. In the few friend reunions that I attended, the restaurants were very crowded, which was a sharp contrast with the emptiness a few years ago, when civil servants dared not to dine out.
  4. Most of my former classmates who work in our hometown are enjoying their lives. They are all very well connected, with their networks extending to all sectors, including politics, economics, business and law. Getting things done is easy. Every day, they enjoy good food and wine.
  5. Many people here choose to have a second child, even couples whose first-born is already in high school. To a large extent, I think it is because their pressure in making a living has alleviated.
  6. There are fewer stores open on the street that used to be home to many construction material stores. There seems to be more stores for agricultural machinery.

Wanzhou, Chongqing

  1. The housing market in small town continues to worsen.
  2. Many borrowers from private lending are running away to avoid paying their debt.
  3. People’s cultural life is deteriorating. With many people unemployed, the participation in gambling and mahjong is rising rapidly.
  4. The two-child policy is working.
  5. Credit-based consumption has significantly grown.

Linyi, Shandong Province

  1. The real economy is bad. Example: For the first time in 20 years, a state-owned steel plant has delayed workers’ wages for 4 months.
  2. The housing market is gloomy. Sales are stagnant. Construction is suspended.
  3. The local government demolish farmers’ houses against their will and force them to buy apartments. Farmers suffer hugely.
  4. Young men without apartment or car cannot get married.
  5. Business at restaurants and the service sector is exceptional.
  6. Taobao village. Thanks to the full coverage of 4G network, it is easy to use Didi taxi app here.
  7. Every village has its own cultural and entertainment facilities.
  8. Migrant workers are lost, not knowing what they should do.

A county in southern Jiangxi Province

  1. All of my former classmates have cars.
  2. Business is very good for cinemas.
  3. The average salary is 2,500 RMB.
  4. In order to marry a wife, the amount of savings that one has to have has been raised from 20,000 to 30,000 to 100,000 RMB.

A county in southern Zhejiang Province

  1. As private lending crashes again, fewer people come home driving luxury cars. But BBA (BMW, Mercedes-Benz and Audi) ownership continues to climb, having easily reached one per household on average.
  2. Housing prices are either falling or rising, at around 7000RMB per square meter, while prices nearly exceeded 10,000RMB per square meter during 2007–2008.
  3. More children are sent to other places for school, as their parents have come to realize the huge gap in education quality between major cities and this county.
  4. Gambling remains popular.

A village in northern Guangdong Province

  1. Population outflow from the village is serious. You can hardly see people here. Most have moved to counties and cities.
  2. Local economy is weak, other than sectors concerning people’s livelihood, which are government controlled.
  3. An important factor that determines one’s wealth is whether he/she has house(s) to rent out or to exchange for new ones when being demolished due to urban planning.
  4. There are also people moving from Tier 1 cities to the county. Popular migration begins to be in both directions.

Southern Hubei Province

  1. All households own cars. Some even take loans to buy luxury cars.
  2. Over 70% of the population has moved to be close national highways or to the city. The village is nearly empty.
  3. Agricultural machinery is used widely. More children are going to school.
  4. People in the village like to compare with each other. Drug abuse is a serious problem.
  5. Average housing prices are 2000–3000 in county and 900 in town.
  6. Serious problems of pyramid scheme, loan shark and people going into hiding after illegal fund-raising. Prices are high. There are many small companies here.

Somewhere in Shandong Province - Hometown of Confucius and Mencius

  1. Nearly all the small companies in the supply chain of coalmines are either suffering from losses or closed. Average housing price in the county is 4000 RMB. Average salary is 2000 RMB. Relationship and money are all that matter.
  2. The divorce rate of people around me is over 50%. To get married, you need to prepare around 500,000 RMB.
  3. Consumption is deeply influenced by traditional culture. Parents are usually frugal while their children are keen on comparing with each other.

Tongling, Anhui Province

  1. Average salary for non-government jobs is 1000–2000 RMB. Civil servants make 4000–5000 RMB on average.
  2. Old apartments are 6000 RMB per square meter while new ones are 8000.
  3. Poor air quality. The sky is always grey.

A village in Shandong Province

  1. Property development in the village and town is heating up. One-floor houses in the village are mostly empty. Average housing price in the county has fallen slightly to 4000 to 5000 RMB per square meter while the price is 3000 RMB for apartments in town.
  2. Many large shopping malls are newly built. Things are expensive.
  3. A large number of local people go abroad to do manual work. There are not enough young women. High divorce rate.
  4. Education in the village is poor.

A Tier 3 city in central and western China

  1. The political landscape is volatile. Many officials are sent directly from the central government.
  2. The traditional energy sector is in decline. The government focus is on developing new energy sector and tourism. Having given up on its connection with the provincial capital, this city is now closer to the Beijing, Tianjin and Hebei region.
  3. Stagnant housing prices are on the verge of collapse at any moment. Downtown housing prices are 3000 to 6500 RMB per square meter. The policy on resettlement houses for demolition and relocation is announced.
  4. Many people who return to visit relatives drive cars with Beijing license plate. Restaurants are crowded. One needs to book in advance during the Chinese New Year.
  5. Civil servants enjoy higher salary and more subsidies than before, but no perks at all.
  6. The environment here is OK.

Shucheng county under Lu’an city in Anhui Province

This is a place with almost no heavy industry. Although it is belongs to Lu’an, I feel it is closer to Hefei.

Income

An average person makes around 50,000 RMB a year, but my overall impression is that people are quite well off. Families usually have savings.

Not many local businessmen can bring in big bucks. Those with a large business usually have borrowed heavily from bank. They may appear to be wealthy, but they need to take new loans every year to pay back old debt. They are under a lot of pressure. I am not positive about the recent prospect of small businesses, especially clothes stores. I have a relative that owns a clothes store in town. Only one person is left to take care of this business. The real economy continues to be weak. We hardly have any industry here. Those that we have are mostly in basic processing.

Most people with stable income are working for state-owned enterprises, public institutions and the government. I have many relatives working in banks, so I am more familiar with this sector. In a county, rural credit cooperatives pay very good salaries, with an average annual income of 150,000 to 200,000 RMB. Almost all employees drive cars, among which there are quite a few BMWs and Audis. The second best employment options are banks like China Construction Bank, Bank of China and Industrial Commercial Bank of China, which have branches in county. Agricultural Bank of China is the third best. The worst is Postal Savings Bank of China. There is one exception, however. It is Huishang Bank. This bank offers the same salary as rural credit cooperatives, but employees are under greater pressure. This pay is more aligned with the market. But not many people are interested. People in the county prefer to lead a comfortable life.

Teachers: Teachers, especially those in middle and high school, face fierce competition, but they make good money. If you are made a class teacher and then open your own tutorial class on the side, making 200,000 RMB a year will be a piece of cake. Teachers often receive many gifts during festivals and holidays. A standard gift package includes two bottles of Wuliangye/ Maotai (white liquor) and a carton of Chunghwa cigarettes. A class usually has over 60 students. Education is valued in my hometown. Teachers have very high social status.

Civil servants: Old civil servants have made enough money and have already paid for their houses and cars. It is new civil servants that suffer. In the context of anti-corruption campaign, civil servants have lost all perks. They make less than 2000 RMB a month. The appeal of this profession is waning.

Telecom operators: Life is definitely hard, for all three operators. Their salary is the same level as civil servants and they often have to face tough clients.

Housing prices

This topic will never go away. When the county government develops new areas, newly-built neighborhoods spring up everywhere, mostly consisting of high-rise buildings of 20 floors or more. As a local person who was born and raised here, I sometimes need to consult my map to find certain places. Finally in 2015, housing prices have stopped soaring. When my family bought our apartment in 2002, it was 960 RMB per square meter. At the highest point in 2014, the prices for second-hand apartments reached 6000 RMB per square. Now prices have fallen to 4500 RMB. An apartment in our building at a lower floor was sold for over 500,000 RMB in 2015. When my family wanted to sell our apartment for 450,000 RMB, the realtor put up our listing for 2–3 months. Only a few people showed their interest. Housing prices in our county have always been high. It’s said that the average price is even higher than in Lu’an city, so people in my hometown often despise Lu’an for it. With so many developed areas, it’s quite impressive that most of the apartments were successfully sold.

In addition to liquidity, population is another factor affecting housing prices. My county has done a good job in attracting the majority of the population here. We’ve heard so much about empty villages, but here, we have empty towns. The county has made all the roads so good to use, with buses accessible everywhere for just 1 RMB that the town population is also living in the county. They commute every day to town by bus. After these years, I feel that the population inflow is about to end. On the other hand, population outflow is a very serious problem. I hardly have any middle school or high school classmate working in my hometown. Out of my 13 cousins, only one or two have left behind and the rest are all over the country. They probably won’t be back and can’t come back. The real estate market without the support of enough population will collapse sooner or later.

Life

It is often said that people of Shucheng are foodies. Restaurants are everywhere and business is good. As long as your network is good enough, opening a restaurant in the county should be quite financially rewarding. KFC has already opened restaurants here, but not MacDonald yet. In this sense, an international brand has entered after all. Local fast food chain restaurant Home Original Chicken is everywhere. Local people also like alcohol. Whenever we dine out, we will drink. Our preferred brands change every few years, probably as a result of brand marketing. A few years back, Yingjia Tribute Wine was the most popular. People drank Yinxing, silver star grade among themselves, which was around 70 RMB a bottle, and Jinxing, golden star grade in business occasions. Yanghe liquor was commonly seen, too. Last year and this year, I see mostly 6-year-old Kouzijiao liquor, priced at 130 RMB. Wuliangye is reserved for distinguished guests. I find it to be strange that although people rarely drink Wuliangye, they are presented as gifts to each other. 

Hotel: There is one self-claimed five-star hotel and one four-star hotel, both of which are running at a loss. Check-in rates are low and only slightly better during festivals and the CNY, which I think is related to the size of local population. During the CNY, people are coming in. But all the weddings that I attended are held in these two hotels, which is kind of a norm here.

Shopping: Many large supermarkets are opened. Business is super good. Prices are about the same as the rest of the country, but a few products are always in shortage. For example, Yakult is one of my personal favorites. During the CNY, I tend to eat more, so Yakult is much needed. But I tried several large supermarkets and still couldn’t find it. There are many Mengniu and Yili and other unknown dairy brands. Also, you can hardly find any Durex or Okamoto here. There are those by less-known producers, put away in faraway corners, which is unlike Beijing, where condoms are stored right next to cashier. There are no shopping malls, probably because the local population is not large enough. Clothes here are expensive, with no discount. You can find well-known brands here, sold in their own stores, not shopping malls.

Car ownership: my own guess is around 60%. My family lives in an old neighborhood, where parking is full. Haval H6 sells very well. It is everywhere. Jianghuai Motor is close to my hometown, but I don’t see many Jianghuai cars. There are quite a few luxury cars with local license plate. I really would like to praise the roads in my county. Wanfo street is almost as good as a highway road. The roads leading to all directions are in good condition.

Environment: My county has no heavy industry. Therefore, there is not much pollution. The PM 2.5 level is alright. It is a very safe county. You can safely wander around the streets after midnight.

Entertainment: Mainly going to karaoke and playing cards. The old cinema has been abandoned. A new one is opened lately, but it is small. Going to the cinema is not quite popular yet. I don’t know if it has something to do with the lack of a shopping mall here.

Education: Education is very important here. To be honest, if a family is not well-connected, education will be their children’s only shot at getting a good job. 

It is obvious that educational resources have become more concentrated. There used to be a high school for each town, but now they have all consolidated. The best local high school is Shucheng High School, which is holding higher bars for the recruitment of new teachers. Only towns have middle schools and elementary schools. There are none in the village. 

I don’t know if it is because universities are admitting more students or education has improved after school consolidation. The fact is that more students are getting into top universities than when I was still in school. Every year, around 5–6 students are admitted into Tsinghua and Peking University, while back when I was a student, it was one every few years. I’ve heard that a student will receive 2000 RMB in reward after getting into top universities. If it is Tsinghua or Peking University, his or her class teacher will be able to get another 50,000 RMB.    Apartments in school catchment areas: They are always in high demand. It’s very difficult to get one. Rent for a year is about 40,000 RMB. Apartments on campus are ridiculously expensive.

Mobile Internet

O2O: Still non-existent in this small county. There is hardly any taxi driver on Didi taxi hailing app. There is no need for it. One can get a taxi easily on the street side. Also, car ownership is very high. 

Mobile payment: Basically none. No offline usage of Wechat payment and Alipay. But Wechat is very popular, even more so than Alipay. Once I left my wallet at home. When I shopped, the business owner was quite willing to let me pay him by scanning his QR code via Wechat.

Cell phone: Young people mostly use iPhone. My young cousins use Xiaomi. Vivo and Oppo stores are everywhere, but very few of my relatives use these brands.

Internet charges: really cheap. My family has a monthly package for broadband, cellphone and landline, which is over 100 RMB and paid for by my employer. In fact, my employer can reimburse more than that. Though the speed is only 10M, it is so much faster than my 100M network with Dr. Peng Group in Beijing. 

To sum up, economy is not great, but people are leading better lives in my hometown. Their savings are increasing and they feel quite happy. Basic consumption needs are met. I think in the future, business opportunities most likely will come from the service sector and consumption upgrade.

A Top 100 county in Northern Jiangsu Province

  1. Car ownership has skyrocketed. When I drove my car back home, I used to have no problem finding a place a park at the roadside. But now, I need to fight for a parking space. Before, most cars that I saw during the CNY had license plates from other places. But now, over half have local license plates. Before, cars with local license plates are within 100,000 RMB, but now most are over 100,000 RMB.
  2. Provincial highways are developing fast. These highways, the speed limit of which is designed to be 100 km/hour, have connected almost all the towns in the county. I suspect they are in oversupply, probably a result of the heated infrastructure construction in the past two years.
  3. Young people from here are doing business across China. Half of them are in construction material and stainless steel business. Business was gloomy last year, especially for steel companies. Only the best ones managed to avoid losses. I have relatives who are in construction material business. Their sales last year were mixed, not good and not bad. But the best of the best are expanding despite the gloomy market.
  4. Triangle debts are a serious problem. Collecting receivables is more difficult than ever. One of my relatives doing construction material business had over 20 million RMB in receivables, but has only collected over 6 million by the end of the year. Sales are OK, but collecting money is hard.
  5. There begins to be companies moved in from Shanghai to the village. I think this is the dividend from the industrial transfer of Shanghai, which is estimated to continue in the next 1–2 years. But water pollution is a concern. Soft landing of housing in county. Having declined by around 20% in these two years, housing prices now stand at 5000 RMB on average. An equilibrium between supply and demand has been reached. Apartments in the county are in the catchment area of good schools. Therefore, they are still sought after by young people working outside my hometown or doing business. Although the housing market is suspected to be in oversupply, apartments still sell.
  6. Many young people in the village choose to leave their hometown to work. As a result, many factories in the village and in town employ overage workers, who are in their sixties. They still work at the frontline of production and make decent money. A woman makes at least 3500 RMB a month and a man, 5000 RMB.
  7. Few young people are farming. Private partnerships to contract land begin to emerge. But since the land is at the downstream of Yangtze River, large-scale machinery cannot be adopted and there is no other way to fundamentally solve the problem of weather dictating harvest. Private partnerships are just beginning. In the short term, those who have contracted land are not likely to make a lot of money.
  8. Education quality is plummeting at and below county level. If the results of college entrance exam are used as a standard for evaluation, then education backslide is staggering. This is probably because good high schools have recruited more students, or good teachers are poached by private schools in southern Jiangsu Province or there is something else.

A traditional farming county in northern Jiangsu Province, with 1.5 million people, many of whom are working outside.

  1. Rent for a 90-square-meter apartment is 4000 RMB a year. Housing prices in downtown area are around 4000 RMB per square meter, but with no buyer. The costs of some developers are 6000 RMB per square meter. To this, I’m speechless.
  2. The construction of at least 10,000 apartments in the county suburbs is left unfinished, including those by developers like Country Garden.
  3. Almost all the elementary and middle schools are in the county.
  4. Admittance rates into universities have steadily declined over the past 20 years.
  5. Car ownership is high. People like to buy luxury cars and compare with others.
  6. Many local people have fallen victim to Ezubao, a Ponzi scheme.
  7. Defaulting in private loans is a serious problem.
  8. A well-known person heavily in debt was murdered by a professional killer hired by his creditors.
  9. Organic farming is popular and produce sells at premium prices. Farmers begin to control production volume to increase quality.
  10. Land transfer is common. Production volume is maintained, but practitioners are mostly in loss.
  11. During the CNY, coaches and taxis are still in order, with no price increase or ripping off customer. This is a safe place. The few criminal cases are mostly related to loan sharks. Creditors that fear lawsuit want to hold their debtors, but are afraid that they will be charged with illegal imprisonment, so they have to offer debtors food and drinks and do not dare to beat them up.
  12. One nightstand and affairs are common. The biggest worry of wealthy people is how to find someone to marry their mistresses.

The rural and suburban area of a prefecture-level city in southern Shandong Province

Income: Local economy is quite advanced. An average family makes around 100,000 RMB a year. 20% are high-income families. Car ownership is around 80%. 60% of the cars are 50,000 to 100,000 RMB and 30% are over 200,000 RMB. There is polarization. 

  1. Salary: Employees of private companies make 2000 to 3000RMB a month. The average salary of employees of public institutions and civil servants is 5000 RMB. It is common for children to take after parents’ jobs. A skilled construction worker earns 250–300 RMB a day while a less skilled worker, 200 RMB. Their wages are slightly down. Passenger tricycle drivers: 80–150RMB/day. Freight tricycle driver: 200–400RMB/day. 
  2. Company revenue: Affected by e-commerce, offline companies have suffered from revenue decline. Many logistics warehouses even begin CNY leave two weeks ahead. 
  3. Illegal income: The land in most villages is occupied by people with power, such as party secretaries, village heads and local mafia. Every village has several millionaires. Most have acquired their wealth by force. Land consolidation is proof that farmers have been robbed of their rightful resources and are therefore, unable to enjoy the fruit of asset appreciation. In every village, there are a few petitions each year. But those who attempt to petition in Beijing are usually intercepted mid-way. 
  4. Counterfeit: Counterfeiting has become a rather developed industry here. I know companies that make fake battery and mostly daily necessities, such as shampoo.

Expenditure:

  1. Accommodation: There are resettlement apartments or apartments built on land of collective ownership in most villages. Housing prices are 2000–3000RMB per square meter. Apartments with normal ownership are 4000–8000 RMB per square meter. There is no oversupply in the market. Most apartments entail no debt. The costs of self-built houses are 800–1200 RMB per square meter, with frame structure. The quality is good. 
  2. Travel: Car ownership is 80%. 
  3. Clothes and food: prices are similar to those in Beijing, but there are too many counterfeited goods. For example, I bought a fake Safeguard product, which couldn’t wash away my oil stain.

To sum up, most families are quite well off.

Population: The majority of the population in this prefecture-level city is not local, but from nearby counties. Most are doing manual work or running their own small business.

Village politics: I have knowledge of about 10 villages. Most of the village heads and Party secretaries used to be hooligans or have been through re-education camp. Each re-election period is marked with heightened fighting and bribing among different interest groups. Corruption is socially acceptable. Also, the anti-corruption campaign has not reached rural areas.

Religion: Christianity is popular. 15% of the local population is Christian. Most followers are middle-aged and old people that are not highly educated. Personally speaking, I quite like Christianity. I think having faith is a good thing. Christianity is after all closer to people’s life than Buddhism and Taoism.

Education: Matthew effect is obvious in high school education. The No.1 high school in the city has concentrated the best educational resources and therefore, can recruit many good students. High schools in counties have poor quality. The number of students that are admitted by first tier universities and the ranking of their universities have declined substantially. Plans to consolidate elementary schools are aborted. Policies are not well implemented. Considering the large rural population, it is surprising that there is no elementary school there.

To win a lawsuit, connection is everything. The rule of law is still far away. Local bullies are having their way.

Environment: There are serious problems of soil, water and air pollution. Groundwater, the source of rural drinking water, is heavily polluted. Air pollution is also bad. No government institution is taking care of the environment.

Personal view: People’s caliber is not related to their income. Income has polarized. Most high-income people make money from grey or illegal means. They have brought no positive influence onto the society. Polarization is a serious social problem. I truly feel that Chairman Mao is a great man, from the bottom of my heart.

Observation of a village in western Zhejiang Province

I come from a village in western Zhejiang Province, which is less developed than other places in Zhejiang, but still so much better than a lot of places in the rest of China.

  1. Housing prices: 4000–8000 RMB per square meter in a small town. I don’t know much about cities, except that my sister paid 9000 RMB per square meter for a second-hand apartment. To build one’s own house, one needs to bid for the land, which was priced at 700 RMB per square meter. This year, it will only be higher. The costs of building a house in the village are around 400,000 RMB. Steel and cement are cheap now.
  2. Corruption in the village. The government spends over 1 million RMB building an old people’s home, while the actual costs are 500,000 RMB. The rest is pocketed by officials in the village. Corruption like this is so common. Another example is land confiscation. Two years ago, a retired village head even afforded to spend over 3 million RMB on an apartment in Shanghai for his son. Ponds are occupied by village bullies for fish farming at no costs. If you want to get anything done, you will have to give money or gifts.
  3. One house after another is built. Rich people are occupying good land. Less rich people borrow money to occupy good spots. Our village is a beautiful place. There is a large river coming through. Riverbanks are covered in vegetation. Of course, when I was young, this place was even more stunning, with green grass and clear water. My friends and I would catch fish and shrimp in the river.
  4. Economy. A few businesspeople that I know tell me that business is hard. Those that do manual work have seen their income improve over the past few years. Fewer people set out firecrackers this year. I’m not sure if it is due to the weak economy. There are more cars, but people’s connection seems to have weakened. There are many people in the village that I don’t know.

A Western Province

In the 9th year - China, a country highly leveraged. After days of my field trip and first-hand interviews, my sadness and anger lingered, preventing me from analyzing the information I gathered.

On Chinese New Year’s eve, I lit my cigarette by the fire, trying to gather my thoughts. I’d like to think of the major challenges that put my hometown to the test as in the 9th year” (in Chinese culture, the 9th year may bring fortune or misfortune). I am writing them down, simply because I think it is the right thing to do.

Pillar industries turned weak and the economic tide has reversed

Background: the resource-rich western province has mining and transportation as its major pillar industries. 

People know that resources are not valuable anymore and you make loss on every ton produced. But they do not know why commodity prices are tumbling and it does not make any sense to them (anyone in the forum who is an expert in this field may want to study this topic further). Then why continue producing them? My guess is that on one hand, the local government wants to keep unemployment rate low. On the other hand, people want jobs. I think it is similar to the concept of variable cost in economics. The transportation cost is down, but there are still many villagers who have purchased large cargo truck on loan because long-distance transportation is still profitable. I feel it is still another form of leveraging. 

The local government did attract some pharmaceutical companies to set up factories locally, but the environmental cost is proved to be too high for these companies to bear. Local residents often complain about their polluting acts. Right now, the city is trying to develop tourism, hoping to become another traveler hotspot amid fierce competition of other tourist cities. The pressure is real, but I hope it can complete the transformation successfully.

Polarization is apparent but not accidental

There are two kinds of affluent class: one that enjoys quality lives and privileges of being in the public sector, but is in a much lower profile nowadays, and one that struggles in the private sector after the year of overcapacity”, in which many owners poured their earnings from the previous year into production capacity expansion, only to find their markets contracted and their cash flow tightened. Many in the second group have closed down their businesses. The rest are waiting for the final outcome in the year of monkey. 

The average working class are typical conservatives. They are the risk averse type who sings when the days are good and complains during setbacks.

We intellectuals sometimes are critical of them for being too conservative. Yet, they may be the most economic savvy cohort. Aggressive businessmen may reap high profits, but are exposed to bigger risks whereas the conservative working class only hope for small gains in a stable life.

Good variety of goods and products on offer, but are the result of handpicking.

The first impression is that people are now able to get various kinds of fresh vegetables, river crabs and fish in the market. The pricing is extremely flexible. Here, you will find market mechanism in full play as the prices for some produces may vary 100% in just three days.

For FMCGs, it is very hard to get value for money products from major brands in county-level markets. Take shampoo as an example. The shelves are only piled with third and fourth tier brands, whose prices are 20% higher than those of P&G or Unilever. Foreign brands are nowhere to be seen here.

Another interesting observation is that drugstores here mainly sell unregistered supplements, health care products and counterfeit drugs. As soon as customers enter the store, sale reps will briefly ask about their symptoms before giving them packages of pricy counterfeit medicine, without even recommending these drugs to them. People who are slow in noticing such sham fall for it, but for more villagers, they either seek no treatment or take IV drip. I talked to many people and found that they enjoyed the process of IV drip, which is such a mystery to me.

The job market is so abysmal that prostitutes are forced to quit.

Average citizens tighten their budgets partly to adapt to the slowing economy, but more importantly as a result of the top level’s heavy-handed policies. A friend from primary school closed down his legitimate foot massage shop because the income from providing regular massage services could not cover the rent. What I found during my research was that many women who had been in the sex industry quit and their phone numbers were no longer in use. Those who are still in the business have stopped providing the full package.

The general public here believe that there are three types of high-income people: 1. people who sell Amway products and earn over 10,000 RMB per month, 2. insurance agent, 3. people like us who work in major cities and supposedly earn at least 600,000 RMB per year. It makes me speechless.

Provincial capital in my hometown

I follow what is going on in the provincial capital because I travel past this place every time I go to my father-in-law’s place and also I went to high school there.

  1. House price of 6000–7000 RMB per square meter on average (the highest is up to 10,000) is considered low, compared with other provincial capitals.
  2. The living environment is nowhere near that of the urban area of my hometown. It is improving nonetheless.
  3. There used to be three top high schools here, but now my high school has become the best one with 40–60 graduates going to top universities each year. The number of students going overseas is similar to that of other top schools in other provincial towns. There are around 600 people in each grade including teachers in my high school. Currently, people here are asking the school to expand its enrollment and stop getting students from outside the provincial capital. No sure about the other aspects.

The county where my father-in-law lives

It is considered a state-level poverty county”, but is equipped with comprehensive facilities, much better than the poverty counties in my province

  1. The main trunk roads are heavily jammed during the Chinese New Year
  2. Property price plummeted to currently less than 2,000 RMB per square meter.
  3. Products have similar prices to those in the provincial capital, but have fewer varieties.

The village where my father-in-law lives

  1. Nicely built houses for all household
  2. Car becomes a necessity when one gets married. All households here have cars, albeit in different price ranges.
  3. Festive mood is strong during the Chinese New Year with Chinese-style parties almost every day. Nevertheless, it is said to have gone weaker these days.
  4. People who work in the cities are making less money and it is more difficult for them to get the money they earned.
  5. China is putting high school education in counties higher on its agenda nowadays. As a result, the county produces 3–4 top graduates each year. Last year, I studied the college admission policies and successfully helped one child from my in-laws’ family enrolled into one of the top tier universities. His score could only get him into a mediocre college under normal circumstances.