One of the problems, as I see it, is that for most expats our USP is most readily exploited in food or education.

Another issue is barriers to entry to a market. If the barriers to entry are low then a local can take the idea and run with it, much cheaper and they will work much more energetically than we will.
For most other enterprises that need capital, even if we have it, without a local network it is hard to get off the ground or prevent it from being 'stolen from you'. The 'black' economy is rife here and the local government does not have a good reputation in this area.

The idea about delivery is interesting, as you are serving the expat community, but it can easily be copied unless you create a cartel (Expat businesses only use expat businesses) which can be done but is illegal.

I thought about supplying organic whole-wheat noodles, as I know a reliable source (family). But transportation of the noodles 400km is not viable in the quantities I think I would sell.

Education is OK for small business but is problematic when it comes to scale up. As you scale up quality control becomes the big issue. Some of the local companies that more recently went big demonstrate this very well.

My other idea I will keep to myself, as it is viable but easily copied.

What might be useful is to create a local chamber of commerce. This way people who are already in business can share information on local regulation and enforcement practices, and strategies to deal with them. A chamber of commerce could also provide support in other areas. Providing information on how to set up a business in Kunming, and recommend/refer reliable agents and/or other support services, suppliers etc.

Just my 2cents.

What do you think of Information Technology(IT) related business in Kunming? Do you think there is a potential? Do you think there is a market for any IT related services that can't be offered by local people?

My thoughts. I could be right or wrong, others will not share all my opinions.

I think that a professional IT support business with professionally qualified people is needed. Most IT support people I have met are overenthusiastic amateurs with exaggerated belief in their abilities.

There are also crooks who will take in your machine for 'needed' repair/service and swap out quality components that they then sell on.

I would see the customers for quality services being multinationals who will want/expect an SLA. Local guys generally do not offer SLAs, and service is hit or miss. But they are very cheap, as barriers to entry are low.
However, being able to get qualified technicians is a barrier to higher quality service provision, making it harder for the 'cowboys'. BUT once a guy is qualified and trained by you there is nothing to stop him running off to set up his own business.
Ideally you would need to try and set up a franchise with a multi-national service provider who is already recognised by big company clients in their home countries.

The alternative niche is the expat community who need support, but this market is small, and won't pay well. Although I am in need of some support right now.

On a separate subject.

I am a corporate trainer, with MBA, and several years experience. I don't teach just business English. However, the Kunming market only wants to pay English teacher rates for corporate training.

I will teach English at higher end English teacher rates, but I will not teach business skills for the same money. I won't do it on principle. I think clients are too cost focussed, and not considering the value added by good training.

This is a related issue to consider for anyone wanting to do business in China. Most business are cost focussed. A few are price focussed. This means that they can only really compete on price, resulting in dwindling margins, a non-sustainable business model. That is why when you go to the market most traders are selling the same old 'tat' only the prices differ.

I have yet to meet a small local business that is quality focussed. But there are one or two that are differentiation focussed. It is these types of business where you can compete, but most of your customers will be expats.

Third post, I know it is bad form, but it is a separate topic.

We looked at importing and trading in health products or cosmetics, but the barriers to entry are too high. You really need US$ 1m to set up, because of licensing of every product you import.

Because it is a closed shop, GNC are the main imported product, prices are high. 300 rmb for $5 bottle of vitamins.
The local stuff is much cheaper, but nobody trusts the quality (I wonder why?).
Ironically, most of the world's raw product is produced in China, exported, and packaged overseas. But you still need a special license for each and every product. I think the testing cost was $6000 per product, and then you needed to get the licence. And so if you have a range of 50 products, well do the maths.

Most companies are not willing to pay this, and so as an Agent you cannot pay it either as you can not guarantee an agency agreement for more than just a few years.

Bleeding heart I know. But this may be worth knowing for those who are considering importing any product that needs a licence.

interesting thread. i remain unconvinced of the worth of setting up as a small business owner in this marketplace. i think it remains at best protectionist, and at worst, downright racist. the foreign business owners i know are constantly dealing with quite laughable scenarios that their local counterparts need not. merely maintaining a legal visa status is a task in itself.

sure, being backed by a massive MNC is one way to go, as in a franchise arrangement, but that hardly satisfies the 'made it on my own' angle that drives many entrepreneurs. i contest that the powers that be do not welcome a financially successful, self-made foreign entrepreneur. the Mark Kitto/That's story is instructive in this case.

i think if one is still tempted to make a go of it, i'd advise keeping a low profile, bending or breaking a lot of rules, having a lot of patience, and never ever looking like you're making bank.

IT businesses here are already mature, from selling SOA to network and data center infrastructures. Most SME's use garbage for their intranet and few use centralized storage (with backups) - most won't/can't pay for it.

The KTVs are fantastic businesses as their intranet requirements are world-class - streaming interactive video, etc - but this is a closed market to newbies with crappy communications skills - and that one-year visa is a killer - makes EXPATS look unreliable as the buyer never knows when you'll decide to bolt.

I disagree with tigertiger on quality focused - Salvador's is an example of quality balanced with social responsibility while retaining cost competitiveness. I've said this many times and will repeat - Salvadors has the best service staff I've EVER seen in my limited time in Kunming. They're well trained, diligent - but perhaps more importantly - they seem genuinely happy. Even 5 star hotel restaurant staff appear like lazy imbecilic morons who'd rather be elsewhere (aside from the front desk staff, the concierges, and the porters).

For expats - expat services are a good way to get your feet wet - your entrance barrier is natural - the language impediment. The question for Kunming is - "can the expats afford the premium and will they pay it". Perhaps a good thermometer would be the organic grocery sales that occur. I'd definitely use the home delivery service for dry goods and heavy stuff (cooking oil, dishwashing detergent) - however to start such a business - you'll have to beat Metro prices and keep the delivery fees down.

My old buddy up in Beijing shuttered his home delivery services because he couldn't control the delivery costs - basically he was subsidizing his drivers. Even buying his own transportation couldn't solve his distribution fees (door to door service) - that and sourcing from Metro was just not as competitive as a trip to carrefour or metro.

Great concept - but he couldn't control the unskilled labor costs. If you want to know about that in person - go chat with the Lazy Bones owners.

For the high-end - example GNC - if GNC wants long-term penetration into this market - you'll have to provide a robust business plan with exceptional long-term revenue assurances - not to mention severely slamming the counterfeiters (long jail terms for endangering public safety - but we won't discuss the death penalty for that here).

Schools are a great concept - the schools here suck - 70 students per class? Half the class don't care about their grades - it's just free daycare for the kids. There are international schools which are allegedly pretty good - but how about foreign run schools for locals - stressing quality education and serious prep for the gaokao or foreign university admissions - this is where your english skills will shine.

Kunming's locals are getting wealther - so it you have the ability - overseas investment opportunities and portfolio management (as well as a way to move money offshore legally) is definitely in the cards - aka wealth management - offering residence, citizenship, etc - bearing in mind that if you guarantee residence or citizenship - you're a fraud (or a criminal).

One thing lacking from Chinese investments is clarity and disclosure - so being honest - allowing the investor to know all the known risks and how to mitigate them would be refreshing. This is something no local or even wealth management division of a bank can perform effectively.

Websites - low to no entrance barriers - especially in copycat land - although gokunming seems to have the corner on the kunming market for expat info.

Another service is after school tutoring. I have an after school tutor tutoring my kids (cuz my language sucks). My daughter's classmate's parents found out (not a secret) and now their daughter also comes over every evening (somewhat reluctantly I might add).

So comprehensive after school tutoring aka cram schools - they're all over Japan - so I'm wondering why the lack (or maybe I can't read the signs) of legitimate cram schools here.

As for hedgepig's comments - if you KNOW the market is protectionist/racist - you're one step up - it's the unknown things that you can't or don't plan for that are fatal. Keeping a low profile is mutually contradictory as business requires a high profile, heavy self promotion, and advertising (free if you know how to do it).

So if you want to start a biz - FIRST look for the natural or artificial entrance barriers and how long can they be effective to protect your monopoly while it incubates. Also - always have multiple exit strategies - ranging from business failure to M&A or if you're extremely talented and lucky - IPO. If you're new to entrepreneuring - look for opportunities that have rapid - preferably immediate - cash turnover potential with low or controllable risk. Ventures which require long lead times before generating revenue tend to fail and remember - in the USA 98-99% of all startups fail in the first year - so try to minimize the damage to your pocketbook - leverage whenever possible.

If you get knocked down - learn your lesson(s), get back up and go at it again - but remember to be realistic - don't fall in love with your dream to the point of self-delusion.

tiger, i agree with your previous post that for business to be successful, it should not easily be copied. Chinese people are very good at copying. For a business to be successful it should be unique and difficult to duplicate. This is true for both Chinese and foreign business right? Have you heard the capitalist rule of doing business? The "golden rule". "He who has the most gold rules". Does this rule apply to Kunming business environment?

Hi Lautou

I did consider the likes of Salvadors and Wicker Basket. I was under the impression that Salvadors was an expat business, as opposed to a locally owned one.

But if I am wrong I will adjust my statement to say it is the exception rather than the rule.

@tigertiger
Yep - Sals is expat owned (right Colin?).

@tiger1986 implied impartiality regardless of expat or domestic, but I'm guessing for now - is focused more on providing useful and valuable expat services to establish a niche, then try to branch as he/she gets more acclimated to Kunming, Yunnan, and perhaps greater China culture.