Current TV has just released their newest installment City on Steroids, and it should not be missed.

Shot in Chongqing, this segment is broken into three parts,

• Day 1 -Bang Bang Men (porters), rampant construction and individual home ownership (every young couples dream),
• Day 2 - life of a bang bang man, migrant appreciation day,a trip to the market
• Day 3 - a trip to Lifan’s car production facility, a look at the shadow that is Chongqing’s skyline, a trip to an English school to discuss the price of progress, and a last stop to visit Mr Rong’s apartment.. under the bridge.

For those that have only been to Beijing or Shanghai (particularly Shanghai), I think the most important things to understand are:
1) This grown is occurring in cities all over China: Chongqing, Chengdu, Xi’an, Kunming, Shantou, Nanchang, and countless others
2) There are large numbers of people in China who are willing to sacrifice everything to live under a bridge to eek out what they feel is a better life for themselves and their family
3) The environmental costs of the torrid pace are tremendous, and eventually Mother Nature is going to ask for the check.

Last year Andrew Hupert from Diligence China was kind enough to invite me over to the Itv-Asia office and pepper me with questions about china’s 2nd tier. For a number of reasons, I have just now figured out how to embed (i.e. shamelessly promote) this video.

A few things have changed factually since the video, but I still believe in the fundamental issues that I run through, highlight, and stutter over.

If you have trouble viewing through this post, click over to ITV’s site, but for those in China I should just warn you ahead of time that it is slow no matter how you cut it.

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A few months back I met with Dan Inman to discuss what I had been seeing in my time in China, related to China’s 2nd and 3rd tier growth, and this week his article was released on CNBC’s European Edition.

Trading Places take a mixed approach of looking at the macro picture and then bringing in the thoughts of people on the ground, and I would suggest readers who are interested in China’s 2nd and 3rd tier to take 5 minutes to read through it.

Besides myself, the perspectives from a number of others have been included to give the article a nice flavor of the opportunities and challenges that face foreign investors when looking at this environment.

In addition to this article, CNBC also highlights a few others that they have written
How Agile Is China?; Chinese Cities Beyond Beijing. Welcome to the 10 Chinese cities that are now coming of age; Chinese Brands The Chinese companies not to be missed in 2008; China Opener - Introducing the world’s next superpower

For those interested in my writing on China’s 2nd tier, you can see the profiles I have written here

1. Sichuan’s imports and exports increased quickly in the first quarter
From January to March, the accumulated imports and exports of Sichuan province reached 4.06 billion US dollars, up 59.7% year-on-year, while 24.6% higher than the national average for the corresponding period, learned the journalist recently from the Chengdu Customs Office.

2. 150-million-yuan bill agreed, receiving transplantation of shoemaking industry from Guangdong province.
On April 16, at the seminar of Sichuan’s Reception of Transplantation of Shoemaking Industry of Guangzhou held in Guangzhou, “China Female Shoes Capital” Chongzhou Base concluded in total 7 projects of shoemaking and accessory industries, involving investment of 1.5 billion yuan, which made itself the industrial park signed with the most projects and largest investment.

3. China’s first specialized international talent market established in Chengdu
On April 17, the Chengdu Software Talent Market of China International Talent Market was officially established. It is reported that it is so far China’s first specialized international talent market approved by the State Foreign Experts Administration.

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TEDA BECOMES ONE OF CHINA’S FIRST ECO-INDUSTRIAL PARKS
Thanks to the efforts in the past over four years, TEDA, on March 8, passed the acceptance test of three ministries and commissions of the central government and then became one of China’s first group of eco-industrial parks. Between March 7 and 8, the expert team and acceptance team of the leading office of the development of the national eco-industrial model zones, which is composed of the State Environmental Protection Administration, the Ministry of Commerce, and the Ministry of Science and Technology of China, conducted in TEDA a two-day acceptance test including the examination, site inspection, and Q&As. Based on the Q&As and discussions of specialists, the teams pointed out in the Acceptance Result, that TEDA was developing into an eco-industrial park “propelled by the government, centered on enterprises, and supported by all people.” The basic conditions and indicators of TEDA meet the requirement as stipulated in China’s Standards for Comprehensive Eco-Industrial Parks.

It is learned that in 2004 the State Environmental Protection Administration of China officially approved TEDA to establish a state-level eco-industrial model zone. In September 2005, TEDA was approved to be one of China’s first group of pilot zones for circular economy by such six ministries and commissions of China including the National Development and Reform Commission, State Environmental Protection Administration, Ministry of Commerce, and Ministry of Science and Technology. After working hard for a few years, TEDA has developed an approach featured by the most efficient way of utilizing resources, reducing pollution, and increasing profits in the process of developing into an eco-industrial park. The next goal of TEDA is to “forge a new mode of green development.”

Apart from TEDA, Suzhou Industrial Park and Suzhou National New & Hi-Tech Industrial Development Zone have also passed the acceptance test. After the 15 day national public announcement, upon the result of the announcement, TEDA, Suzhou Industrial Park, and Suzhou National New & Hi-Tech Industrial Development Zone will become China’s first group of eco-industrial model zones. (Tr. by Dong Jing)

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1. Southwest China’s unique national grain exchange center settled in Chengdu
Recently, the State Grain Administration gave the official reply to approve Sichuan to organize Chengdu National Grain Exchange Center, which is the only state-level information platform for grain exchange in Yunnan, Guizhou, Sichuan, Chongqing and Tibet, five provinces and municipality in southwest China.

2. Chengdu’s investment environment for commercial property rated best in China
It was learned on April 4 from Sichuan Commercial Chains Association, at the newly concluded “2008 China Commercial Property Industry Annual Meeting” were disclosed the city of best investment environment for commercial property and region of biggest investment potential of China in 2008, and Chengdu stood out among its peers and was recommended by the jury as the “2008 Best City of Investment Environment for Commercial Property in China”.

3.Eight provinces and cities including Sichuan signed agreements of 25 billion yuan to push east-west inter-provincial exchanges
The Inter-provincial Economic & Cooperative Exchange Conference co-sponsored by Beijing, Tianjing, Shanxi, Gansu, etc., eight eastern and western provinces and cities, was held in Xi’an on April 6. Over 800 government and company representatives of the above regions have participated in the event, and 40 economic cooperation projects between the East and West have been signed, amounting to over 25 billion yuan.

4. In 2008 Sichuan has 267,800 college graduates, with 48% post-graduates having signed contracts
It was learned on April 8 from Sichuan Provincial Department of Education, by the end of March, 116,400 graduates from the province’s high learning institutions have signed employment contracts, with a rate of 43.47%, up 2% year-on-year, of which, signed post-graduates count 8,159, being 48.08% of the total, undergraduates 45,600, 39.69%, and vocational school graduates 62,600, 46.10%.

It is reported that there are 267,800 students graduated from 83 higher education establishments in Sichuan this year, an increase of 30,000 over last year, growing by 13%.

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Bill Dodson from This is China writes a piece in Euro Biz this month entitled Parts missing that looks at some of the difficulties a few friend are facing when entering China’s interior market of Chongqing.

It is one of those pieces that will surely get a lot of reads, because he is right. Chongqing is missing some hardware, a lot of software, and for many firms it has yet to develop the local market necessary to warrant real interest from a lot of firms.

why this article is interesting is that Bill’s writing reminds me of conversations I had 5 years ago with investors about Nanjing and Chengdu. they were in Shanghai, they were in Beijing, but when I mentioned Nanjing or Chengdu… the response was “where?”

In one case, I was working on a 10 million USD investment for 6 buildings. the development firms had gone bankrupt, creditors were knocking LOUDLY, and we had exclusive right to it. We spent two days going over the sites, mapping the locations, and building the models based on current market conditions and a general understanding that Nanjing was about to see a huge economic jump over the next 5-8 years that would make these properties really really sexy.

The result of our analysis was that without doing anything, investors would make 200% within 6 months (the lock out period) by simply flipping the properties.

200% sounds attractive right?

well… after meeting with 10 investment groups based in Shanghai, and more based internationally, we came to a single conclusion that 15% in Shanghai was better than 200% in Nanjing because investors really did not understand the fundamentals of China. It wasn’t that there weren’t opportunities. It was that these opportunities required some background, a little imagination, and patience.

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