Top 5 Chinese cities of opportunity

December 8, 2022
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If you are thinking to enter the Chinese market, we assume that you are considering where to start. In the yearly report published by PwC called “Chinese Cities of Opportunity 2022” (CCO), 47 cities in China are categorized and sorted based on economic growth, infrastructure, and future planning characteristics. Ultimately, the report ranks the cities with “the most potential for business investment”.

Chinese cities have gone through a great economic renaissance in the past 4 decades, thanks to a fast and steady process of urbanization. In 2021 China had 24 cities with a product outcome of more than a trillion yuan each. These cities today are well-planned, urban, modern, and smart like any other city around the world, and sometimes even more.

This report is a great source of information to learn about the place with the best potential for your China business operation, and the opportunities that come with the city you decide to invest in from a global perspective.

Here is a concise review of the 5 leading cities of opportunity based on the following criteria:

  • Intellectual capital – The number of academic institutes in the city, the number of studies published, and the technology developed by those institutes.
  • Technology and innovation – The number of patents patented in the city, technology companies that work in the city, cars running on substitute energy, and the paste of implementing new technology in the city itself.
  • Urban resilience – Medical resources, the availableness of medical insurance, pension plans and stability, personal safety score, and the readiness for emergencies (such as Covid-19)
  • Transportation and urban planning – Road planning, public transportation routes, and the number of public vehicles.
  • Sustainable development – the amount of water resources, the ratio between nature and urban areas, and air pollution.
  • Culture and quality of life – the average income, consumption rate, unemployment rate, and the number of cultural institutions running in the city.
  • Economic clout – the number of Well-known enterprises working in the city, average regional GDP, and foreign direct investments.
  • Cost of living – average wage, public transportation cost, average rent cost, cost of employees.
  • Ease of doing business – Entrepreneurial vigor, reliance on foreign trade, logistics efficiency, and business environment.

The following is a list of the cities from 5th place to 1st:

In fifth place  -Hangzhou

Province – Zhejiang

Population – 11 million residents

Advantages for businesses – Fast and innovative city-wide internet infrastructure

City’s best attribute – Urban planning, public transport, “smart city”

City’s weakness – Cost of living

Hangzhou is the capital of Zhejiang, and even though the city is over 2200 years old, today it is known as the “city of mobile internet”. In the last couple of years, the city municipality has implemented a series of new technology mechanisms that help run the smart city. Simultaneously, investing heavily in the city’s web services, leading China as the city with the fastest internet, helping develop their future for city planning and public transportation.

The convenience and innovation, together with being relatively close to Shanghai (175 KM) and its location on the Yangtze River Delta are the main factors for the high cost of living in the city. According to the CCO report, out of 47 cities, Hangzhou came in 46th in cost of living, meaning it is the 2nd most expensive city in China! Regardless, the city’s plans in the last decade have put Hangzhou on the map when it comes to international companies opening branches in the city, as the city came in 5th in the report for the “Ease of doing business” category.

In fourth place – Guangzhou

Province – Guangdong

Population – 17.4 million residents

Advantages for businesses – The largest port in southern China, making it especially easy for shipping in and out from the Philippines, Malaysia, Singapore, Vietnam, and Thailand.

City’s best attribute – Urban resilience

City’s weakness – Cost of living

Guangzhou is the capital of Guangdong province and the 4th largest city in China. The city’s location and its transportation infrastructure have made it the main location for doing business in China. Guangzhou has also won the not-so-great title as being the “most expensive city in China”. But do not let that title deter you out of doing business in the city, as in all the other criteria Guangzhou is ranked in the top spots, as one of China’s most important cities with many resources, and high-end technology running the city. In a recent post we published regarding the “5 most important ports for logistics in China” we showed the importance of the city for internal and international business in China.

Guangzhou also stands out for its city-wide resilience, as only 8 people have died from Covid-19 in the last 3 years. The city itself is heavily equipped with medical resources, and the average wage and pension are of the highest in all of China. Unlike other cities in China focusing on one business attribute, Guangzhou has business diversity, providing availability for a large scope of businesses, and a good combination between development and manufacturing.

In third place – Shenzhen

Province – Guangdong

Population – 18.6 million residents

Advantages for businesses – The local government offers incentives for tech companies willing to open R&D centers in the city.

City’s best attribute – Technology and innovation

City’s weakness – Intellectual capital

Shenzhen is known as the “Chinese Silicon Valley” and it comes as no surprise that its ranked 1st in technology and innovation in the CCO report. In the ’90s, Shenzhen was designated as the first Special Economic Zone (SEZ) in China, and the great amount of technology companies working in the city has placed the city as the capital of high-tech in China. Today, you can find in Shenzhen many international companies and their cutting-edge R&D centers.

Shenzhen’s biggest weakness is shown by its lack of intellectual capital, to be more precise, its lack of academic intellectual capital.  Shenzhen does have many universities, but those institutes lack research centers, placing Shenzhen in 9th place in that category. Out of 47 cities, that’s not that bad, but it shows that in the “Technology capital of China”, the style of research is not academic.

This statistic will not tarnish Shenzhen’s reputation, as according to PwC ‘s report, Shenzhen will continue to lead China’s cities as the “city with the most potential for development”. Considering that China’s government defined hi-tech and high-end technology as key strategic fields that the country should and will invest in, Shenzhen as a high-tech hub will probably develop even more.

In second place – Shanghai

Province – Shanghai

Population – 24.8 million residents

Advantages for businesses – international city culture and the world’s largest port

City’s best attribute – Culture and quality of life

City’s weakness – Cost of living

Shanghai is the largest city in China, it is so large that it is also a province. It is also the largest city by population and until recently the largest metropolitan area in the world. In almost all the categories of the report, Shanghai comes in 1st. From business and innovation to urban planning and public transport. But the most outstanding rank that shanghai leads, is the Culture and quality of life criteria. The international personality of the city is not the same as before Covid but shanghai still leads China culturally. The city is full of cinemas, theatres, Conference halls, museums, restaurants, music venues, bars festivals, and more. It comes as no surprise that the quality of life in the city is the highest in China according to the CCO report. The quality of culture in the city places Shanghai as a very popular city, and the cultural side of the city does not harm the business side. According to the report, shanghai is at the top of the list when it comes to almost all the business, city development, technology, city planning, and innovation criteria.

However, the cost of living in Shanghai is very high. Shanghai was crowned “the most expensive city in the world” several times, and even though currently that is not the case, it is a close race. Despite that, the average wage in Shanghai is higher than the average wage in other Chinese cities, so you should distinguish between the cost of working and living in the city and the cost of visiting it. Shanghai is at the top when it comes to international companies based in a Chinese city. In fact, over the past five years, Shanghai has implemented over 750 new policies for improving market access, drawing more than 2.25 million new market entities of various types. The figure represents a 52.7% increase compared with the previous five years, domestic media reported.

Shanghai remains one of China’s most economically active cities with the number of enterprises per 1,000 people reaching 111, ranking the first in the country with roughly one in 10 people owning a business. Taking into account the Shanghai port, the largest and busiest in the world, it comes as no surprise that shanghai is a key player in the world supply chain, making it a great location for conducting your business and logistics in China.

And in the first place – Beijing

Province – Beijing

Population – 21.8 million residents

Advantages for businesses – Best location for companies specializing in B2G (Business to Government).

City’s best attribute – Intellectual capital

City’s weakness – Sustainable development

Topping our list and the CCO report ranking the highest score – Beijing. According to PwC, the ancient capital of China is the most influential regarding China’s economy, and it holds great potential for development. The city rankings in the CCO report were all high, but one was more outstanding than all the others – Intellectual capital. When looking at these criteria Beijing leads in all the subjects, including the residents’ academic background, the number of academic institutes and their research output, and the number of academic R&D centers that ranked the highest in all of China. Moreover, almost all the ministries, government buildings, and offices are based in Beijing, making the city a place where influential decisions and policies are formed and executed.

Although Beijing leads in the rankings of the CCO report, there is one that she falls short in – Sustainable development. During the first lockdowns in China back at the beginning of 2020, when the city came to a halt, cars stopped and planes were grounded, local news broadcast a phenomenon that has not been seen in years – the sky of the city was crisp, clear, and blue. The scenes reminded many of how troublesome air pollution in Beijing can be. Thanks to recent governmental policies in the city regarding air pollution (as a part of the 14th 5-year plan that set air pollution goals) the situation is better, but the air pollution is still felt. Regardless of that, Beijing holds the title of the most important city for the Chinese economy and is ranked first in the PwC ‘s CCO report for the greatest city of opportunity in 2022.

This seashell graph shows the 20 largest cities in the world by population. Asia houses most of the largest cities in the world, and China is home to four of those cities. Shanghai with 27 million in 3rd place, Beijing with 20 million in 8th place, Tianjin with 15 million in 13th place, and Chongqing closing the list in 20th place with 13 million residents.

We hope you benefited from this list and found interest in these cities that have an important role as a part of the supply chain and trade in China. PTL Group has offices and warehouses in Beijing and Guangzhou, and our HQ is in Shanghai – the most cosmopolitan city in China. If you were thinking of starting a business in China, we would be happy to help with every step of the way and provide you with business support in China until you reach operational independence.

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