Greetings from Xian, China.
Background on Xian, China
Xian is located in the Shaanxi Province in China. Geographically, it is almost right smack in the middle of China, located around the same latitude as Shanghai and almost directly above Chengdu.
Historically, Xian was the capital of China during many of the early dynasties like the Qin and the Tang Dynasty. Back in the day, it used to be known as Chang’An. Today, Xian has a population of 8.7 million and according to our driver, its key industries are (1) aerospace and defence, (2) higher education and (3) tourism.
To most people, when they think of Xian, they think of the Terracotta Warriors from the tomb of Qin Shi Huang, the first emperor of China and founder of the Qin Dynasty.
What’s changed from 17 years ago?
This was my second time visiting Xian. The first time was about 17 years ago. I remember visiting the Terracotta Warriors but other than that the only other memory was the proliferation of internet cafes in the city centre.
Fast forwarding 17 years to 2017, here’s what struck me from this time around.
Red bikes, yellow bikes, green bikes and bikes of all colours
We previously wrote about China’s sharing economy. While we did not see any umbrella sharing schemes in Xian, we did see a ton of shared bicycles. There were green bikes, yellow bikes, orange bikes and silver and red bikes. On the positive side, the bikes were being used. People were scanning the QR code, unlocking bikes, riding them and then leaving them behind once they reached their destination. On the negative side, there is a lot of excess capacity. Competition is very intense and until one or two of these operators out-spend and out-live the others, I struggle to see how they would recoup their capital.
Cleaner and more orderly and not just the toilets
My second key impression was how much cleaner and more orderly Xian has become. In the past, when I visited some of China’s tier 2 cities, the two things that I dread the most were (i) visiting the smelly toilets and (ii) crossing the street. In many emerging markets, although there may be traffic lights, crossing the street is always an adventure. Drivers never give way to pedestrians. This time, to my surprise, half of the cars actually slowed down when we crossed at the cross walk.
Secondly, the streets were a lot cleaner than I remember. There were many trash and recycle bins around town and they were being used for the most part. That said, there are some major hygiene issues (I’ve saved this for the ending) but China and Xian has come a long way.
Coffee Vs. Fried Chicken – Chalk up a win for Starbucks
Given our previous post on the fast food industry, we wanted to see how Starbucks and KFC were doing. By our rough count, Starbucks seems outnumbered KFC by a ratio of 5-to-3 in Xian. In total, I think we saw nine or 10 Starbucks and like six KFCs.
As a coffee lover, my first thought is that Starbucks is still very under-penetrated. Granted, Xian is not going to be like a typical US city where there are Starbucks around every corner but for a city of 8.7 million to only have a handful of stores clearly shows that there is scope for a higher concentration.
This impression was corroborated by what I saw when I visited the local Starbucks one day around 5pm. The first thing I noticed was that every single table was full. Secondly, the price point for a Grande Black Coffee in Xian (Rmb 22) is only 10% lower than that of Hong Kong (HK$29). Given the difference in overall cost of living, this gap is remarkably small. Overall, I came away feeling more optimistic that China will be the future growth engine of Starbucks.
Mobile technology is huge in China but there is a catch
Ahead of this trip, we’ve heard and read about how China is evolving into a cashless society where everything can be paid for using your mobile phone. Unlike the West where credit cards dominate, in China, it is all about AliPay and WeChat Pay. We were eager to try this out but there’s a catch. You need to have a local bank account.Embed from Getty Images
As Hong Kong residents, it is possible to set up an account with AliPay HK or WeChat Pay but that account would only allow us to transact in Hong Kong dollars. Since we could not top up our account in Rmb, we were stuck paying for most things using good old fashion cash. Although this is a problem for foreigners, with 1.3bn consumers, the domestic opportunity is arguably already big enough.
Rise of the domestic brands – Watch out Apple
There’s good news and bad news for Apple from our trip. The good news is that despite the early knocks against the iPhone 8, the phone is actually pretty good. Despite only having one lens, the camera was a marked improvement over the dual camera of the iPhone 7-Plus.
The bad news is that China’s domestic consumers don’t seem to care about Apple much. When we asked our guide about the upcoming launch of the iPhone X, his response was “I’m more looking forward to the Huawei Mate 10”. Around town, we also noted many more ads and store fronts featuring Vivo and Oppo mobile phones.
Best and worst food experience of the trip
To finish off this post, we share our best and worst food experience from Xian.
One of the best foods that we tried was the Rou Jiaomo (肉夾饃）. This is kind of like a Chinese hamburger. It can be filled with either beef, lamb or pork. It was delicious and only costs about Rmb 8. Definitely worth trying.
I’m a big fan of lamb and also a big fan of barbecue. So when you put them together in the form of roast lamb skewers, this combination is hard to beat. It was delicious, juicy and fragrant. It was really enjoyable until….(HEALTH WARNING: You might not want to read on if you have a weak stomach).
I finished it and after walking down a couple of streets, I saw a lady rummaging through the trash and recovering the used sticks.
Aaargghhh....I guess the cleanliness and orderly part has not reached everyone yet.