• Matthew Grandage

2nd-tier cities - Chengdu most international?


China-based consultants Maxelli produced a report recently asking which of China's 2nd tier cities is "the most international".

Now that is an interesting question, especially if you're planning to open a rep office! Most British SMEs already realise that China must be understood regionally, and that regional variations can be a great as the differences between some European countries (e.g. in terms of industry, language, application of law, culture, development)[1]. Furthermore, they know that China already has over 200 cities with populations over 1 million, but that the majority of these are very different from, say, Shanghai or Beijing - about as different as London is from Portsmouth or Wakefield, for example.

Differences like these open up opportunities for business. SMEs wishing to connect with Chinese universities will probably find it easier to get an audience with a university or college in a 2nd- or 3rd-tier city than at Beijing University. And those who want to promote their brand amongst consumers might do well to look for places where foreign brands are relatively few, rather than places where others have already flooded in. But when we move away from Beijing, Shanghai, Guangzhou and Shenzhen (the 1st tier) things change pretty quickly. The number of foreign consulates drops away, as does the number of resident expatriates, and you can begin to feel rather lost.

Among the 2nd tier cities, "higher levels of city internationalisation hold greater appeal for foreign companies due to increased market potential, accessibility, liveability and growth prospects."[2] Of course 2nd tier cities will be far from uniform, including how "international" they feel. But without spending a long time in them, how can you know where the differences lie? Which cities have a good track-record of welcoming foreign rep offices, for example? Which are the most internationalised, at present?

Hence Maxelli's report. It comes with important caveat - Maxelli actually only focussed on the 6 cities where they have an established presence: Chengdu, Wuhan, Chongqing, Xi'an, Changsha and Dalian.[3] So they are only comparing these 6, and ignoring the rest.

Now I must admit, I was a bit sceptical at first. The "international-ness" of a city could be a pretty subjective matter. How might one go about measuring it? Counting the number of Startbucks? But as I read through the report, including the sections that outlined their methodology, I was impressed. Their analysis is based on 6 themes: global economic strength, international commerce, social capital, infrastructural connectivity, government & political engagement, and culture & tourism (download a copy here by clicking the report image).

Want to know the result? Well, Chengdu comes out on top overall, followed by Chongqing, Dalian, Xi'an, Wuhan and Changsha (in that order). The inclusion of Dalian gives a helpful comparison, and shows that it's not simply a matter of the coast being more advanced or international than the inland regions. But it's not that simple – each city has strengths and weaknesses in terms of internationalisation. In any case, SMEs vary as much as cities: one "theme" may be particularly important to your business while others are less so, and your best office location may be based on other factors entirely (the presence of a local industry sector, for example). But as a "window" into a special aspect of modern Chinese society, this report makes interesting reading, no matter what your involvement with China is.

[1] UKTI and CBBC demonstrate this in their free guide Doing Business In China, where they adopt a model based on 12 "city clusters".

[2] Maxelli 2015, China International City Index p4

[3] The other cities classed as 2nd tier are: Tianjin, Suzhou, Foshan, Harbin, Wuxi, Zhengzhou, Changchun, Hangzhou, Nanjing, Donguan, Qingdao, Shenyang, Hefei and Jinan

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