Foreign firms flock to the second tier

Foreign firms flock to the second tier

Thu, 06/09/2018 - 09:10
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Hefei

ADVANCING Hefei is China’s fastest-growing city, with more than 73 per cent GDP growth from 2012 to 2017. Photo: Shutterstock

Four of the top five fastest-growing cities in China are outside the country’s big four of Beijing, Shanghai, Shenzhen and Guangzhou, with second tier cities becoming increasingly attractive landing spots for foreign companies.

Analysis by Dezan Shira & Associates’ China Briefing indicates that Hefei, capital of Anhui Province, is the country’s fastest-growing metropolis, with its gross domestic product rising by more than 73 per cent between 2012 and 2017.

According to a survey by China’s State Administration of Foreign Experts Affairs, Hefei has become the third-most attractive city in the People’s Republic for foreign talent, just behind Shanghai and Beijing.

Hefei was named as a pilot city China’s Made in China 2025 initiative, while the city is aiming to achieve a GDP of more than ¥1 trillion ($200 billion) by 2020.

China Briefing said Yangzhou, Jiangsu Province, was the second fastest-growing city over the half decade, with 72.6 per cent GDP growth.

Yangzhou released plans last year to become a hub for strategic emerging industries, such as new energy, new medicine, novel materials, energy conservation, high-end manufacturing, and biotechnology, with the aim of generating output of ¥700 billion from those sectors by 2020.

Yangzhou was followed by Shenzhen, Chengdu and Nantong, at 72.09 per cent, 70.7 per cent and 69.7 per cent GDP growth, respectively.

By comparison, GDP growth across China over the same period was 59.3 per cent.

The next generation of Chinese graduates were keenly aware of the growth trends, China Briefing said, with 40 per cent of 90,000 graduates surveyed as part of a research report on China’s employment market saying they would like to work in emerging cities such as Chengdu, Hangzhou and Chonqing.

Just 27 per cent hoped to work in first tier cities, the survey said.

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China Briefing said increasing costs of labour, housing and land had led to many international companies seeking out second tier cities for Chinese investment.

It said lower tier cities had also put in place a wide range of business incentives designed to attract investment, including a variety of entrepreneurship and housing subsidies.

“The rise of lower tier cities has also brought huge investment opportunities in the daily consumption, education and elder care markets,” the report said.

“Consumption growth in second, third and fourth tier cities is nearly 1.5 times larger than that of first tier cities, according to the 2017 Consumption Upgrade Big Data Report, jointly released by China UnionPay and JD.com.

“However, some analysts claim that, for the short term, second and third tier cities will continue to suffer from talent and capital disadvantages over emerging and first tier cities, which have more abundant cash flows.

“Nevertheless, as the government continues to restrict population growth in first tier cites, many businesses and talented individuals may still choose to settle in lower tier cities as they continue to offer lower living costs and a variety of investment incentives.”