You don't need to change your working directory at all to read files. Use absolute paths instead.
Use the current file location as the starting point, and resolve all relative paths from there:
import os.path
HERE = os.path.dirname(os.path.abspath(__file__))
somefile = os.path.abspath(os.path.join(HERE, 'subfolder1_with_10_text_files_inside /somefile.txt'))
If you want to be able to read static files, do remember to set the application_readable
flag on these, as Google will otherwise only upload them to their content delivery network, not to the app engine.