Rural China booming thanks to boom in online trade
A new wave of young entrepreneurs is emerging in remote, rural corners of China.
Theirs is not a tale of smart horticulture but one of online opportunism, with e-commerce booming even as the rest of China’s economy slows.
They are optimists, willing to move to places where they know no one, to re-educate themselves, to change careers, to borrow from friends and relatives in order to go into business on their own, to risk all for a brighter future.
Li Dan and her husband Li Zhong, both aged 30, are typical participants in this new wave.
They are making a fortune in an ancient village in the dusty northern Chinese countryside with its harsh climate of extremes.
Online commerce is emerging as the only significant part of the economy, besides old-fashioned retail, where private companies dominate. It is starting to drive change and prosperity in rural areas where half a billion people live.
A McKinsey report says that about 257 million people in lower-tier cities and rural areas are online shoppers, compared with 183 million in China’s higher-tier cities.
Alibaba established a Rural Taobao strategy two years ago, and already runs 16,000 service centres in villages and 380 larger centres in counties — from which they both package products for national distribution and deliver to people in the countryside.
Its principal rival JD.com has opened 1500 rural self-operated service centres as well as establishing Jingdong Bang, a home appliance delivery and maintenance team in partnership with local shops, with 1300 outlets in lower-tier cities and the countryside.
The Li family lives two hours’ drive north of Beijing, where they have converted a former kindergarten and courtyard buildings into a warehouse and offices in Mafang Cun — Horse Raising Village — where cars have to be parked outside because the streets are only wide enough for horses.
They manage a fast-growing business selling diving and swimming gear in China but also in Hong Kong and Taiwan, and increasingly in countries further afield.
The Lis both grew up in “peasant” families, but have become rich in a manner their own parents find unimaginable.
During 2016 their company’s turnover rose 25 per cent from 2015 to about $6 million, chiefly through sales via China’s biggest platforms, JD.com, Taobao and Tmall.
Jobs are being shed in China’s cities as labour costs rise and factories both automate and migrate to cheaper locations like Vietnam or Bangladesh.
Rural workers who used to chase manufacturing jobs in the cities are finding such work elusive and housing impossibly expensive.
They are reassessing the value of staying in the countryside, with cleaner air, cheap or free accommodation, fresh food and a lifestyle they like. Now, the jobs are coming to them.
For the rural hinterlands surrounding China’s cities — formerly wastelands, with older people scraping a living from scraps of land — are starting to boom, thanks to soaring online trade.
Land is comparatively cheap there — the large warehouse and office space the Lis are leasing costs them just $20,000 a year, a mere 1 per cent of the cost inside Beijing — and village leaders are throwing their support behind the transformation.
The specialisations pursued by these online entrepreneurs surging into or from rural China are extraordinary.
In Shandong province, for instance, one village now hosts the country’s biggest hub for supplying party costumes, for both children and adults, to China and the wider world.
Dan and Zhong met in Beijing after shifting there in search of a better future. They and their peers were until recently abandoning Chinese villages to the very old and the very young. Parents and grandparents looked after the children whom workers could not keep in their factory dormitories.
But the Lis are among the pioneers setting a new trend: going back to the countryside.
Dan said: “We picked on diving because of its fast growth. Chinese people have become more enthusiastic about travelling, and they love dive destinations like the Maldives.”
Dan and Zhong watched their friends start to buy online. They saw this trend coming. But to surf the wave, they needed to lease a large space at a low rent, inconceivable in Beijing.
They set up their business there in 2012, starting with 10,000 yuan — about $2000, mostly borrowed from relatives — for office equipment and to buy dive gear direct from factories.
Zhong said: “It was very hard at first. We made almost no sales for almost half a year, then began to pick up a few orders a day, until our present volume.”
They employ about 20 mostly young people in Mafang Cun, who work in two shifts so they can answer customer queries and keep the packaging process going from 8am through to half past midnight.
Zhong said: “We are hopeful that more young people from the village will join our team over time, as our business grows, so they don’t have to pack up and go to Beijing as we once did.
“We are already one of the biggest employers in the area.”
In total, they stock almost 10,000 different items.
The Lis have developed a long-term partnership with a logistics company, which sends a truck to pick up their goods for delivery every day at 6pm. They are dispatched the same day the order comes in, and Zhong said they were delivered within three days of placing the order, anywhere within China.
“There’s no doubt online commerce has made our business possible,” he said. “And there are many similar companies starting up in the countryside all around Beijing now — the opposite from the way China began its economic reform era 35 years ago, from city centres out.”
Source: The Australian Business Review. Date: 2017-07-14