When thinking about meeting designations, there is just about every type and size: from major convention hubs to smaller, boutique style cities. The key for meeting planners, is finding the right fit for their specific meeting. Often times, you might hear a planner say that their annual meetings are only held in 1st tier destinations. Or that a specific destination is a 2nd tier city. How is the designation of different tier cities in China like?
While various criteria exist for defining a particular tier, the tiers of cities in China usually refer to key characteristics of the city, including its economic development, provincial GDP, advanced transportation systems and infrastructure, and historical and cultural significance. China’s first-tier cities usually refer to Beijing, Shanghai, Guangzhou, and Shenzhen which make “The Big 4.” Second-tier cities include capital cities of each province or coastal cities like Tianjin, Chongqing, Chengdu, Wuhan, Xiamen. Third-tier cities are usually medium-sized cities of each province. However, even third-tier cities have populations in the millions and represent a promising potential market for your business.
Tier 1 cities were the first to be opened to competitive economic development by the Chinese government. These cities are recognized for being densely populated as well as culturally and economically influential. Tier 1 Cities attract the attention of foreign enterprises given their large middle class representation and income levels well above the national average. Cities that fall within this category represent China’s most developed markets in terms of consumer behavior. First tier cities register total retail sales of around 30 billion RMB ($4.75 billion USD), and an annual per capita income of around 11,000 RMB (1,774 USD).
Tier 1 Cities are: Shanghai, Beijing, Shenzhen, and Guangzhou. These cities are known for being important political, cultural, industrial and financial centers in China as well as key hubs for the greater East-Asia region.
The rapid economic growth and rising incomes in 2nd tier cities has caught the attention of foreign investors over the past several years. The markets in Tier 2 cities are a lot less competitive and the labor costs are substantially cheaper compared to Tier 1 cities. A rapid increase in consumer spending in second tier cities is creating more demand for foreign brands. However, the income of consumers in second, third, and fourth tier cities has been reported to be less than half compared to those in first tier cities. At the end of 2011 around 60 cities in China qualified as second tier cities (China Sourcing).
There are approximately 200 county-level cities in China that fall within the category
of a 3rd tier city (China Sourcing). Within third tier cities there is also a categorical subdivision like I mentioned above. Third tier high cities include Zhongshan and Shantou. Third tier medium cities include cities like Xining and Baoding.
Work Cited:
“China’s City Tier System”, The Adventure of OSIO in Shanghai, China, Web. 16. Nov. 2012. https://osio-china.com/2012/11/16/chinas-city-tier-system/
“What is meant by first tier, second-tier, and third-tier cities?” SME Center, Resources and Referrals for Small Business. Web. http://sme.amcham-shanghai.org/en/faq/what-meant-first-tier-second-tier-and-third-tier-cities
“1st, 2nd, 3rd Tier Cities: What do the Designations Really Mean?” blog empower Mint. Com, http://blog.empowermint.com/site-venue-selection/meeting-destination-tiers/
The disparity of wealth between different tiers is linked to the Hukou system. First tier cities are large wealthy cities, which do not allow for much if any migration. Instead the Hukou system usually forces migrants to move to small to medium provincial cities. Migrants’ low income pulls down GDP per capita in cities with large migrant populations.
From one point of view, the Hukou system is beneficial here. In cities that are overcrowded, why should further migration be allowed? Traffic is terrible, and rents and wages are already too high to allow for individual or firm growth. Additionally, the more people that are migrating to Tier 2 or even Tier 3 cities, the more likely those cities are to develop, spreading out the wealth in China. There is of course a curve to this, since as you mention the migrants’ low incomes pull down GDP per capita in these cities at first. But as firms decide to locate in these cities, wages will go up.
Although they lack the immense economic opportunities and population of 1st tier cities, it seems as though second tier cities are beginning rapid development. Investment banker, Robert Lawrence Kuhn, refers to these second tier cities as “first- class opportunities” (WSJ). More and more investors are seeing the potential of these cities which lack the prestige of the four first-tier cities. Additionally, recent government infrastructure projects make some of these cities in central China more accessible.
Works Cited: http://online.wsj.com/ad/article/chinaenergy-cities
14 of these second tier cities account for 54 percent of the total imports from the U.S., according to figures from the U.S. Commercial Service. Therefore, these industries are creating a demand for workers. The infrastructure projects- that Ellen mentions- indicate that the government is acknowledging these cities’ key role to China’s economic growth.
http://online.wsj.com/ad/article/chinaenergy-cities
According to a survey by the CNBWeekly Magazine, 15 cities were designated as the “New 1st tier cities.” These 15 cities are mainly the ones used to be in the 2nd tier but showed strong economic potentials, including Hangzhou, Chengdu, and Nanjing. It it really interesting seeing how the rankings are changing with time.
Work cited: http://baike.baidu.com/link?url=THzl1rr-Jr_mZ1x6_bpMKu8AQq5-p1KhlX0lt_1oLKJ_KenCTP2QvZzSpSv4DmxokhFsy8rI8gkoNqbWd8GCN_
With a population of almost 1.4 billion and rapid urbanization, this isn’t too surprising. As migration is extremely discouraged from “the Big 4,” many will choose the next-best cities to relocate to, – this includes both individuals and firms – as rents and wages are lower. With added firms and a higher population, the eventual result is the development of these next-best Tier 2 cities into Tier 1 ones.