Chinese Tier 2 and 3 cities need to do a much better job to promote foreign investment


I have visited China for business repeatedly over the last 15 years. As most would be more than aware, the growth on any econometric variable has been sustained and typically staggering. As someone who studied economic and regional development as an undergrad student the demographics of China is equally of interest and impressive.

The size and scale of cities and metropolitan areas in China is staggering. It has 15 cities with over five million residents and approximately 140 more with over a million residents. It is a market and level of potential consumers that any other country (particularly one like my home country of Australia) can only dream of.

The challenge for these 15 cities with over 5 million people, let alone the 140 with over one million is standing out in a competitive environment. The largest cities (Beijing, Shanghai, Shenzhen et al) clearly stand out and have defined roles and investment attractiveness with which to differentiate themselves.

For the remaining 150 or so cities the differentiation is difficult. From my experience city or provincial level executives and officials regularly make the rounds of global cities to promote their city as being the optimum place to invest in China. To be frank they do a poor job. I do not think that they realize the level of competition that each city has for investment. When the competition internally (let alone from Indian, Vietnam etc) is so tight everything needs to be beyond reproach. Too often it isn’t. Marketing is poor, presenters can be tangled up in hyperbole and as a result, loose with facts, language skills need to be improved (if you are selling to a foreign entity, English or other language proficiency is a core requirement).

To highlight the challenge, the following are “must have” attributes, not differentiators. Too many cities believe that naming these attributes gives them instant access and street credibility.

  • Population over 2,000,000
  • Access to a new International airport
  • Access to high speed rail
  • Provincial level political support (overt or covert) –this is a post on its own!!!!
  • Development of business centers (occupied or otherwise).
  • A university (of some description)

To put it into context, if you have the attributes mentioned above, you are not differentiated. You have only reached the starting gates. Attributes such as network and telco connectivity are often overlooked (alongside power supply consistency, and other utilities).

Exceptional performance in the “must have” attributes alongside exceptional performance for connectivity et al is essential if Chinese cities want to successfully compete. Failing to do this will mean that cities will fall back to the pack and not have any differentiation. If you are looking to invest in China, you need to understand the real capabilities of the city, get through the hype and ensure that you have the opportunity to maximize your investment in a city or province that stands out. It is not easy, but it is also not impossible.

If you require further information, please contact Phil Hassey, Founder capioIT. capioIT is an advisory firm focused on helping organisations to understand emerging technology in emerging markets. Phil may be contacted by email below,
phil@capioit.com

About capioIT - Phil Hassey

capioIT is an advisory firm focused on helping organisations to understand emerging technology in emerging markets. CEO Phil Hassey established the company in 2010
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2 Responses to Chinese Tier 2 and 3 cities need to do a much better job to promote foreign investment

  1. I agree with the points you make here. I also believe that it is important for Chinese cities that are not near the Eastern coast to emphasize other aspects that make them attractive for foreign investment. For example, Yunnan and Sichuan have the best potential for hydropower in China, while Xinjiang has excellent solar energy potential and the lowest blue collar minimum wage in China at $2/hour. Most second and third tier cities have demographic or geographic quirks like these that help to distinguish them from the crowd.

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