Returning migrants: the Chinese economy's next great hope?

It's early on a crisp winter morning in Yujin, a sleepy village in northern China, and two young men are getting ready to start work.

Their days consist of selling locally grown fruit and vegetables. Today, it is pomegranates picked up from a neighbouring village, Shangchen, as it is too early in the year for the sweet potatoes that Yujin is known for. Working together with neighbours comes naturally in poor, rural areas like these, where farming has long been the only source of income. And, for the men, it's second nature to make the most of any resources that are available. All they need is a basket of pomegranates, a set of lights and ... an iPhone 6.

"Hello baby, let's start," one of the men, Handsome, speaks into his phone. Handsome is a live-streamer, whose job is to promote agricultural products online.

The operation Handsome and Xu are running may be modest, but the work they are involved in represents one of the great new hopes for the Chinese economy.

For years, Chinese rural workers have been leaving their villages behind for new lives in the cities. In 2016 alone, some 282 million rural Chinese moved to cities - more than the population of Germany, France and Turkey combined. The scale of migration can be seen every Lunar New Year - when around 3 billion passenger journeys are taken over 40 days - many of them by migrant workers visiting their families. While this migration built the mega cities that have helped China become the world's second largest economy, it has also had adverse effects, overcrowding cities and impoverishing the villages left behind.

The emergence of the returning entrepreneurs has raised hopes in Beijing that a reverse migration may be gathering steam. There are now roughly five million returning entrepreneurs like Handsome and Xu, according to the Ministry of Agriculture, and they account for two-thirds of new business registrations in China's vast hinterland. Between the end of 2015 and the end of September 2017, their numbers swelled by 391 a day.

GREEN GREEN GRASS OF HOME

Rising living costs in cities have driven many migrants to return home, many with little to show for their spells away. Others have found it challenging to raise families as China's social welfare system restricts people from one area of the country from accessing government services such as health care and schooling in another area. And even without such problems, in the past villagers like Xu - who only completed middle school - have tended to struggle to find jobs other than on factory floors or at construction sites.

WATCH: Migrant workers in China's bustling cities

At the same time, new opportunities have been cropping up in rural China. Thanks to the billions of dollars Beijing has been spending on expanding internet access and building new motorways, Chinese villages are more connected than ever, making it easier for residents to start businesses and reach customers far away.

Indeed, government statistics suggest half of all returning migrant workers are engaged in e-commerce in some form or other, whether it is selling agricultural products, like Handsome, or providing related services.

Economists say China needs this new breed of entrepreneur badly. Not only do they bring back skills learned in cities, but they create jobs in areas where there are few opportunities other than low-paid farming work.

"[Returning migrants] have become a major driving force in closing the gap between Chinese cities and villages, and between the coast and inland," says Cui Chuanyi, a researcher at the Development Research Centre of the State Council, a government think tank in Beijing. "Much of China's future growth lies in these less-developed regions."

China is in the middle of its economic restructuring. Although the economy grew 6.9 per cent last year - when it registered its first rate of growth increase since 2010 - analysts say its traditional economic engines of export and investment are losing steam. As the country searches for new sources of growth, the rise of the returning migrants looks an appealing option.

Already, they have made an impact in provinces such as Henan and Sichuan, where growth is outperforming the national average. "A surge in new businesses founded by returning migrant workers has fuelled that growth," says Zhang Xiaobo, a professor of Peking University who recently studied these regions. The returning migrants, Zhang says, have come up with innovative business models, leveraging underused labour resources in villages to compete with low-cost countries in Southeast Asia.

One case in point is Huadong Outdoor Product Company, an export-oriented furniture factory in Henan Province set up by Chen Weihua, a former migrant worker who returned home after making furniture - and his fortune - in the city. By hiring farmers to work in his factory during their spare time, Chen has tripled the factory's sales revenue to US$13 million in 2017. Pingyu County, one of the poorest regions in China, has shared Chen's success, gaining 2,000 new jobs and hundreds of thousands of US dollars in tax revenue.

Chen's story is exceptional - it has made headlines that have made even the Ministry of Commerce in Beijing sit up and take note, but there are countless other returning migrants who are nevertheless changing rural China in a slow but steady way.

"It was not our choice," Wang Jiangyan, 30, Xu's business and life partner recalls. In 2014, the couple's newborn fell sick, leaving the two factory workers no choice but to return to their hometown, the only place where they could access subsidised health care.

To make a living, Wang and Xu began making electronic components for their former employers in their backyard. Occasionally, they would sell the components to individuals on Taobao, the online retail platform, which they had become familiar with during their time in Xian City. Soon, their online experiment grew to include home-grown sweet potatoes.

Since then, the couple have hired villagers to help purchase fresh produce from neighbouring farmers. They've also strived to make their e-store stand out - hence the hiring of Handsome to live-stream fruit and vegetable sales to health-conscious urbanites. The reward? Xu's sales have increased 30 per cent.

Their son has recovered, but Xu and Wang no longer pine to return to the city. "We found the life in the countryside isn't bad," Xu says. Last year, the couple made about US$78,000 in profit, roughly 10 times what they made as factory workers in Xian.

Businesses such as Xu's may seem small fry compared to the enormity of the Chinese economy - consider, for example, that the internet conglomerate Tencent generated nearly US$24 billion in 2016 - but the large (and growing) numbers of returning migrants means their contribution stacks up.

It's a contribution that has been noted by China's e-commerce giants. A report in 2016 by Ali Research, the market intelligence arm of Alibaba (the owner of the South China Morning Post), found more than 770,000 online stores on Taobao were run from the countryside. Alibaba plans to help a further 200,000 rural youth return home to launch online shops in the next three years.

NOT EVERYONE'S A WINNER

Of course, not every returning migrant has a success story. "I cannot say all returning migrants turned entrepreneurs have failed, but I can say I haven't seen one that succeeded," says Ma Yong, a taxi driver in Liquan County, a farming region in Shaanxi province.

Ma himself recently tasted the bitterness of failure. Last year, his family opened an online retail shop selling home-baked nuts and other agricultural products. But despite their best efforts, they found few buyers and were forced to shut the shop after five months. Ma's nephew, who invested US$6,500 in the business, eventually returned to Kunming city hundreds of miles away to work in a cement factory.

Although the central and provincial governments are keen to offer subsidies and low-interest loans to rural start-ups, budding businessmen often complain of corrupt officials and bureaucratic red tape.

And the boom in returning migrants has itself created problems. As ever greater numbers of villagers enter online retail business, e-stores are forced to compete in price wars that many smaller operators cannot afford.

But for those who can overcome the challenges, there is the knowledge that their success will have benefited many of their fellow villagers. Farmer Xu Mojuan, for instance, is among those to have benefited from the rising business of Xu Pengfei in Yujin.

Previously, the farmer, 44, had spent much of her spare time watching television or playing mahjong, as jobs were few and far between.

And as its villagers get richer, Yujin itself has been gradually changing. Once a land with nothing but village huts, Yujin has seen hotels, supermarkets and restaurants spring up. Passenger vehicles chug alongside tractors and motorcycles on muddy countryside roads.

"In the past, villagers here only rode buses. But now, many of them own a car," Jin says. His revenue has increased five or six times since he started and last year, he employed two workers, his first hiring ever. Jin's final goal is to expand his three-room shop into a multi-storey facility much like the one he used to work for in Xian City.

And Xu, like most other returning migrant entrepreneurs, has no plans of resting on his success.

His 200-square metre warehouse may have been completed just last year, but Xu is already planning to expand the facility tenfold this year and employ more workers. "The demand for agricultural products through e-commerce platforms will definitely grow. If you wait to respond to the trend only when it comes, you will be running late," he says.

As a regular listener to online courses about entrepreneurship, Xu should know what he is talking about. Perhaps that's why, just like today, he insists on visiting the warehouses to see how his workers are doing. At the back of the warehouse, Handsome the live-streamer is speaking into his iPhone. "Buy two boxes of pomegranates today, get the second one at a discount." ■

This article originally appeared on the South China Morning Post (SCMP).

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