25 August 2019

In search of the next batch of top-tier cities

Foreign enterprises investing in China are always astounded by the sheer size of its cities, both in terms of area and the number of people. Anywhere else in the world, a city with a population of 1 million could be deemed big enough to be regarded as a metropolis, but that wouldn’t hold water in China, where there are more than 100 cities over that threshold.

For a long time there has been a lack of city ranking that can serve as a reference for overseas investors looking to step out of Beijing, Shanghai, Guangzhou and Shenzhen — the “big four” first-tier Chinese cities — to ratchet up sales and expand business in the broader parts of the country.

Shanghai-based CBNWeekly conducted some research late last year to gauge the potential of the non-big four cities based on a set of statistics and indicators ranging from gross domestic product and per capita income to the number of higher education institutions, international flight routes, foreign diplomatic and consular missions, outlets of major brands as well as offices set up by Fortune 500 enterprises.

In the CBNWeekly findings, more than a dozen cities were nominated as quasi-top-tier cities. They include Chengdu, Nanjing, Wuhan, Tianjin, Xi’an, Chongqing, Qingdao, Shenyang, Changsha, Dalian, Xiamen, Wuxi, Fuzhou and Jinan.

Ningbo, Kunming, Zhengzhou, Changchun, Wenzhou and 31 other places were ranked as second-tier cities.

The CBNWeekly research has inspired a new around of discussions. Although different analysts may have different criteria, there are some cities that are beyond debates and are widely recognized as promising upstarts.

Chengdu is one of them.

Some newspapers and magazines have been running headlines recently that Chengdu may become China’s No. 5 city. The city, capital of the southwestern Sichuan province and home to 14 million people, is now increasingly signaling its ambition to emerge as the most predominant urban center in western China.

Chengdu is the champion in many aspects among its peers outside the tier-one cities. To just name a few, the city has 10 foreign consulates, is on the map of 70 international flight routes, and is host to several multinational firms including Intel, IBM, Dell, Microsoft, Toyota, General Motors, Volkswagen, Shell, Morgan Stanley, Philips and Foxconn. As many as 252 Fortune 500 companies have their regional offices or factories in the city.  

Chengdu’s GDP was nearing 910 billion yuan (US$148.2 billion) in 2013, up 13 percent from a year earlier, putting the city in the 8th position nationwide and the second highest among all provincial capitals. When some observers began to question the sustainability of the city’s breakneck speed of economic expansion, Chengdu municipal government revealed that the city invested more than 650 billion yuan in infrastructure and industrial projects last year, representing almost 2 percent of China’s total.

More than US$10 billion foreign investment flew there last year as the local population spent almost 400 billion yuan in consumption. And, over 50 universities and colleges there supply 160,000 graduates annually.

Hurun China Rich list estimated that Chengdu has more than 1,000 people with disposable assets worth 100 million yuan or more in 2013 while Forbes noted in a report that the city’s luxury goods sales volume was only next to Beijing and Shanghai in 2012.

Chengdu even held the Fortune 500 Global Forum in June last year.

Chongqing, Changsha and other hopefuls

Chongqing lies just less than 300 kilometers east of Chengdu, and the latter’s astounding growth in recent years is a source of embarrassment for its rival, which is the only provincial-level municipality in central and western China designated by the central leadership. The Bo Xilai saga has been another heavy blow. Yet, Chongqing still boosts the largest urban area after Beijing, Shanghai and Guangzhou with its GDP (1.266 trillion yuan) taking the 7th rank nationwide last year.

Although relatively low key compared to its neighbor’s high profile efforts in spurring development, Chongqing’s economy is on a solid footing with expertise in auto, steel, and IT sectors. The city has a number of indigenous heavyweight players like Changan Automobile (000625.CN, 200625.CN), Chongqing Iron & Steel (01053.HK, 601005.CN) and Chongqing Brewery (600132.CN).

Analysts say that as Chengdu is getting congested with investors, newcomers can consider the nearby Chongqing as a viable alternative, given the city’s strengths such as sound infrastructure and transportation facilities. With a total area of 82,400 square kilometers and a population of over 33 million, Chongqing also has abundant land and labor supply.

Changsha in central China’s Hunan province is also tipped as a rising star on the back of its success in heavy equipment manufacturing and software, cultural and creative sectors. Hunan Television, one of China’s most popular free-to-air TV broadcasters based there, has greatly enhanced the city’s profile. Changsha now has the highest per capita income in central China and is a key rail and aviation hub in the region.

Being a magnet for shoppers, college graduates and entrepreneurs in Hunan and neighboring provinces like Jiangxi and Guizhou — the three provinces have a combined population of over 100 million, Changsha can serve as an ideal gateway to extract the opportunities in central China.

The Chinese Academy of Social Sciences has noted that cities located too close to the “big four” are less likely to emerge as key destinations for overseas investment as their charm is inevitably whittled away by their bigger neighbors. Instead, the academy has identified some thriving candidates like Wuhan, Zhengzhou and Shenyang — all of which are the largest cities in their respective regions — that may stand a better chance to earn themselves a place in the nation’s elite city club.

– Contact the writer at [email protected]


EJ Insight writer

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