A $300 Billion Rainbow Economy Is Booming in the Middle of China
Kate Thomson (center) with friends outside the Underground, an LGBT-friendly bar she manages in Chengdu that hosts a weekly pride night. (Photographer: Ka Xiaoxi for Bloomberg Businessweek)

A $300 Billion Rainbow Economy Is Booming in the Middle of China

(Bloomberg Businessweek) -- It’s 11 p.m. at AMO, an underground lesbian nightclub in Chengdu, and 17 women—in androgynous clothing, their hair closely cropped—line up at the front door to welcome partygoers. Among them is Yang Yang, 25, who started working at AMO (Esperanto for “love”) more than three years ago when she moved to the Sichuan capital in the southwest of China. In that time she’s earned enough to buy a 645-square-foot loft. “I can have fun and drink while making money,” says Yang, who’d trained to be a kindergarten teacher. “How much better does it get than that?”

Yang, her workplace, and her apartment are all part of China’s growing rainbow economy: the ecosystem of consumers, companies, and workers that serve the nation’s LGBT population. State media estimate that this segment of the nation’s economy is worth $300 billion a year—making it the world’s third-largest after Europe and the U.S., they say—fueling a consumer base that companies are eagerly, if cautiously, trying to tap.

A $300 Billion Rainbow Economy Is Booming in the Middle of China

“Companies are getting braver, but they can do more and will do more as they grow more accustomed to the market,” says Darius Longarino, a senior fellow at the Yale Law School Paul Tsai China Center who studies LGBT issues in China. “I understand their caution, because things can change with the snap of a finger. And there’s a perception that in China nothing’s allowed unless it’s explicitly allowed.”

A world away from Beijing, Chengdu has become a haven for the LGBT community, whose members are drawn to the relaxed, open vibe. The city sits in a basin surrounded by mountains, which kept it isolated for centuries. Fertile ground and abundant natural resources allowed it to stay mostly self-sufficient, with an attitude that’s both “mind your own business” and “anything goes.” The city of 16 million, best known internationally for its pandas, was voted the gay capital of China in a recent poll by gay dating app Blued. Less-expensive rents have lured young people, cultivating a hip, progressive culture that’s spawned San Francisco-style cafes filled with millennials. Economic growth is comfortable, with last year’s 8% expansion well above the national rate.

“Before I got into college, I probably had never met anyone who is gay, but here this feels like home because all our close friends are gay or bi,” says Katherine Guo, 19, a university student who moved to Chengdu from Guangzhou, a commercial center farther south. “When I was back home, I never told anyone I was bisexual—literally nobody.”

A $300 Billion Rainbow Economy Is Booming in the Middle of China

While there aren’t official statistics on Chengdu’s LGBT population, the nickname “Gaydu” has stuck. A 2018 study by Tongle Health Counseling Service Center, the oldest nongovernmental organization serving its gay community, estimated there were 140,500 gay men in the city. Although China decriminalized homosexuality in 1997 and removed it from an official list of mental disorders in 2001, gay, lesbian, and transsexual individuals still live in a gray area. There’s no law against being LGBT, but no rules protect against discrimination, either. China doesn’t recognize gay marriage.

Given this tension, established companies have tried to reach out in subtle ways. Earlier this year, Starbucks Corp. sold rainbow-themed mugs and tumblers that were snapped up. The items included the phrase “Love Is Love,” with no explicit mention of LGBT rights. In 2015, after the U.S. legalized gay marriage, Alibaba Group Holding Ltd., its online shopping site Taobao, and Blued held a competition to send seven same-sex couples to Hollywood to get married. They received more than 400 submissions. This year, brands including Bayer, Coach, Diesel, Old Navy, and Shake Shack supported the annual ShanghaiPRIDE week.

In Chengdu, small companies make everything from cellphone cases emblazoned with rainbow colors to designer condoms, and one entrepreneur launched two lesbian-friendly apartment buildings in 2016. (Members of the LGBT community say they sometimes feel they need to hide their sexual orientation from landlords.) Shops on Taobao cater to lesbians such as Yang, who call themselves T’s (for Tomboys), selling masculine clothing in female sizes. Companies offering surrogacy services often hand out flyers at LGBT events.

Still, success depends on toeing the line. Gaydorado, a mobile game that lets players star as a heartthrob in a gay-friendly metropolis, has about 20,000 daily active users who spend several million yuan per month on in-game items. But it doesn’t have the government license required for domestic distribution, and Chinese players must use a technical loophole to gain access, as they do to play some Western blockbuster titles.

A $300 Billion Rainbow Economy Is Booming in the Middle of China

The right approach is key, especially since the government can be unpredictable—­supportive at times, then punitive when invisible lines are crossed. In 2017 popular lesbian dating app Rela was shut down after it backed an event in Shanghai to raise awareness for LGBT rights. (It later relaunched.) At other times, the authorities have sought to highlight their tolerance. When China hosted the Summer Olympics in 2008, state-run news agency Xinhua ran a feature promoting nightspot Destination as “Beijing’s hottest gay club.”

“It’s kind of a message to the Western world that LGBT in China, they’re not really living in a very oppressive environment,” says Edmund Yang, who founded the bar 15 years ago. It’s since grown into a gay institution—a four-story complex with an outdoor cafe, art gallery, multicultural center, and clinic that offers free HIV testing.

Blued says there were about 70 million LGBT people in China in 2016, based on the estimate that roughly 5% of the global population is LGBT. But most don’t live an out-and-proud lifestyle: A United Nations Development Programme study of sexual orientation in China that same year found that only 5% of sexual and gender minorities have come out.

A $300 Billion Rainbow Economy Is Booming in the Middle of China

Chengdu and other second-tier cities with large LGBT populations, including Chongqing and Hangzhou, are largely ignored by big companies marketing to the demographic, according to operators of gay and lesbian establishments. “I think a lot of big companies don’t do anything outside Beijing and Shanghai because they don’t know that Chengdu and Chongqing have a big LGBT population,” says Kate Thomson, who manages Underground, an LGBT-friendly bar in Chengdu that hosts a weekly pride night. “You can get away with more in Chengdu because it’s under the radar.”

In a survey of more than 7,500 LGBT individuals in China conducted by Blued and gay rights organization Danlan, more than half of respondents indicated that corporations’ support for LGBT policies play the biggest role in influencing their purchasing decisions. According to consultant LGBT Capital, those consumers have a purchasing power of $541 billion.

One company that’s betting on that rainbow economy is AMO, which also has clubs in Beijing, Shenzhen, and Chongqing. It’s planning to open another in Shanghai this year and expand to more cities in 2020. “When we first opened, we didn’t expect demand would be so great even though Chengdu is dubbed the ‘nation of LGBT,’ ” says Xiao Bai, who manages the clubs nationwide. “The desire to find a place to relax, have fun, and date is very strong.” —with Zheping Huang and Dandan Li

To contact the editor responsible for this story: Jodi Schneider at jschneider50@bloomberg.net, James Ellis

©2019 Bloomberg L.P.

With assistance from Bloomberg

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