Understand China’s Cities

China has approximately 160 cities with populations in excess of 1 million people and they are developing at different rates. A growing middle-class of 350-400 million consumers are according to ad agency executive and author Tom Doctoroff:

…increasingly modern and international, but they remain distinctly Chinese

The search for understanding of the Chinese consumer is complicated by the fact that data is unreliable or fractured. As a result there has been a growing reliance on the so-called Tier system to group different cities, their growth rates and consumer patterns. The ‘Big Four’ megapolises Beijing, Shanghai, Guangzhou and Shenzen are labeled Tier 1.

The next 150+ Chinese cities are labeled from Tier 2 to 6.

However the Tier method increasingly lacks credibility. The Chinese government doesn’t have an official explanation for what defines one tier from another. Banks, journalists, fund managers and researchers have all adopted different methods to calculate a difference. They use gross domestic product data, population figures, housing sales and income statistics to define the tiers. Other analysts automatically brand provincial capitals as Tier 2.

The China-Britain Business Chamber has added to the profiling methodology. In its recent trade report the CBBC labels the Big Four as Tier 1 cities with their large populations and largest GDPs but it then breaks up the following tiers. Eleven Tier 2 cities (e.g. Chengdu, Chongqing, Tianjin, Foshan, Shantou, Jinan, Wuhan and Xi’an are called “Climbers”.

A further 10 T2 cities with wealthy consumers and a relatively small market size (e.g. Wuxi, Ningbo,Zhuhai) are called “Niche” while the lowest income Tier 2s with large populations (e.g. Fuzhou, Qingdao, Zibo, Dalian) are simply “Mainstream”.

The Wall Street Journal dumbed down the way to gauge a Chinese city’s consumer engagement- ‘Count the Starbucks’.

Read the full article on Apple News.

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