Obscure no more: China's cities gain clout

AgExporter, Dec, 2003 by Ralph Bean

China's rapid economic growth is not just making the Chinese market larger, it is also generating new markets that embrace more of the country's 1.3 billion population. Beyond the "big three" cities of Beijing, Shanghai and Guangzhou, previously obscure cities are becoming major centers for manufacturing and commerce. And incomes are rising rapidly, making the cities even more vital and attractive as markets.

A handful of these emerging cities--such as the coastal resorts of Qingdao and Dalian--have already caught the eye of U.S. food exporters. But most are little known outside China.

Survey Evaluates Market Potential

The Shanghai ATO (Agricultural Trade Office) conducted a private survey to identify the top markets for Eastern and Central China. Knowledge about these markets is limited by a lack of data. Official statistics miss these markets as they report figures only for provinces, provincial capitals and special economic zones.

Excluding Shanghai, the survey encompassed the 30 largest cities in the region, based on GDP (gross domestic product). The ATO also wanted to capture other economic indicators--population and per capita and median incomes--that best reflect the potential of these markets.

Twenty Boston's

The survey ranked cities based on GDP, including only the core urban area for each city.

Some of these towns, like Chengdu and Qingdao, are well known. These provincial capitols and major ports support a strong presence of international food retail chains.

More surprising was the high concentration of cities, most unknown to Westerners, in the provinces of Zhejiang and Jiangsu. The Hangzhou-Shanghai-Nanjing corridor is packed with large, prosperous cities, all connected by a web of road, rail and river transport links within a few hours of Shanghai.

Jiangsu's northern neighbor, Shadong province, also turned in a strong performance, adding four cities to the list (several others fell just short).

A second surprise was the high income levels for certain cities, a key indicator of market potential. As expected, all the cities placed below Shanghai in income, except for Wenzhou in the southern Zhejiang province, where income matched Shanghai's average of $1,570 per year. Huzhou and Ningbo, also in Zhejiang, came close to matching Wenzhou's level.

The survey was dominated by coastal cities. Major interior cities such as Xi'an and Chongqing rated low in the statistics despite their enormous populations. Hefei, another interior city, also rated low despite its proximity to Shanghai.

Retail development, measured by the presence of hypermarket chains, appears to vary independently of income levels, perhaps due to differing regulatory climates. For example, retail development in the wealthy coastal city of Wenzhou is minimal, while the less wealthy interior cities of Wuhan and Kunming are home to numerous foreign-invested retail chains and hypermarkets.

China's emerging city markets will continue to grow in commercial importance. And as manufacturing costs rise in cities like Shanghai, many companies will relocate or build new facilities in these lower-cost cities.

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Look First, Then Leap

Before jumping into these markets, exporters are advised to do their market research. China is a very diverse market. Consumer culture, cuisine and even local language can differ dramatically among neighboring cities. Although most of these cities are at the end of supply chains beginning in Shanghai or Guangzhou, it is a mistake to assume that products will eventually wend their way into nearby markets. Marketing strategies need to be adapted to account for these differences.

Consumers in interior cities tend to be price sensitive and less receptive to new products. If a product is new to China, it may be better introduced into established markets where unfamiliar foods are more readily accepted.

RELATED ARTICLE: The numbers game.

Many of the figures in this survey, especially population, differ from those published elsewhere. That is because this survey only included official population within the statutory city limits.

Suburbs and satellite cities are excluded, as are undocumented migrants (whose numbers can rank in the hundreds of thousands). Income statistics, too, should be considered with caution.

Top 30 Cities, Ranked by GDP

Emerging City Markets in Central and Eastern China

City        Province   Population   Gross        Per Capita    Median
                       (Thousands)  Domestic      Income       Income
                                    Product      (Dollars)    (Dollars)
                                   ($million)

Suzhou      Jiangsu      1,171       25.1           1271        1082

Chongqing   Chongqin     3,934       23.8            813         736

Hangzhou    Zhejiang     1,933       21.5           1318        1169

Chengdu     Sichuan      2,341         20            983         848

Wuxi        Jiangsu      1,245       19.3           1143        1041

Qingdao     Shangdon     1,704       18.4           1055         985

Ningbo      Zhejiang        87         18           1450        1268

Wuhan       Hubei        4,490         18            883         766

Nanjing     Jiangsu      2,822       15.7           1070         n/a

Jinan       Shangdong    1,850       14.5           1157        1084

Yantai      Shandong       918       13.5            999         986

Wenzhou     Zhejiang       563       12.8           1596         n/a

Shaoxing    Zhejiang       311       11.2           1290        1096

Weifang     Shandong       684       10.9            883         811

Nantong     Jiangsu      1,417       10.8           1026         n/a

Xi'an       Shaanxi      2,926        9.9            811         703

Changsha    Hunan        1,489        9.8           1053         968

Xuzhou      Jiangsu      1,121        9.6            921         814

Changzhou   Jiangsu        837        9.2           1137        1009

Kunming     Yunnan       1,940        8.8            942         n/a

Jiaxing     Zhejiang       300        8.6           1302         n/a

Taizhou     Zhejiang       275        8.2           1311         n/a

Jinhua      Zhejiang       362        8.2           1256         n/a

Yancheng    Jiangsu        981        8.1            839         n/a

Zhenjiang   Jiangsu      2,666        0.7            931         861

Yangzhou    Jiangsu        531        6.7            871         n/a

Taizhou     Jiangsu        304          6            900         n/a

Huzhou      Zhejiang       351          5           1377         n/a

Hefei       Anhui        1,107          5            824         n/a

Mianyang    Sichuan        440        4.5            951         799

n/a = not available.