Rapid migration has created a number of "megacities", which have emerged as major forces of both local and national economic growth. However, these trends have also stretched the resources in these cities to their limits, resulting in skyrocketing house prices and a socio-political backlash against new migrants among long-term residents. In recent years a new wave of urbanisation has shifted the focus to China's smaller inland cities, which are increasingly offering better job prospects and cheaper living costs.
Grappling with China's internal migration flows has long been a policy headache for officials across all levels of government. The past few decades have seen a steady flow of migrants from central and western China to the eastern and southern parts of the country, resulting in the rise of a number of "megacities", including Beijing (the national capital), Shanghai and Shenzhen, defined as having a population of at least 10m. This population explosion, however, has put pressure on local resources and even resulted in government policies seeking to limit or expel certain segments of the migrant population. At the same time, second- and third-tier cities have in recent years developed into attractive alternatives for many of China's internal migrants, buoyed by improved economic or social development.
As China shifts its economic drivers away from investment and towards consumption, many inland cities have made sound progress in terms of industrial diversification, logistics and liveability. Our emerging city rankings aim to identify these rapidly growing cities, beyond the well-known and established centres of business such as Shanghai, Beijing and Shenzhen. These rankings also emphasise robust comparisons between cities across inland China—an area of essential importance for policymakers as China rebalances its economic growth towards the western parts of the country.
The aim of our emerging city rankings is to identify new business opportunities in urban China. We have chosen growth indicators, rather than absolute values, as the basis for the index. These metrics are based on historic growth rates in 2011-15, as well as our forecasts for 2017-21, covering indicators such as GDP, metropolitan population, urban consumption, fixed-asset investment (FAI) and urban built area (as a proxy for urbanisation). To ensure that the ranked cities have a critical mass that is sufficiently attractive to investors, a minimum metropolitan population of 1m people by 2021 was used as a cut-off point, making eligible 97 of the 292 prefecture-level cities ranked in our dataset.
Nanyang (Henan) topped the rankings, driven by a rapid pace of urbanisation and growing metropolitan population. Xiangyang (Hubei) and Suqian (Jiangsu) ranked second and third respectively, owing to strong growth in local investment.
China emerging city rankings, 2017
(Rankings by a sample of subindices)
Note: The China emerging cities rankings cover 97 cities in total. Cities forecast by The Economist Intelligence Unit to have a core metropolitan population of 1m in 2021 are included.
Source: The Economist Intelligence Unit.
Despite it having the highest GDP forecast in the country, we have ranked Guiyang (Guizhou) at 14th, because of low levels of urbanisation: we forecast that Guiyang's metropolitan population will grow by just 3.8 per cent annually in 2017-21, much slower than the national average. In contrast, cities in the north-east and in resource-dependent regions have fallen in the rankings. In particular, we have scored all seven cities in Liaoning—which has suffered economically in recent years—at the bottom of our rankings, with Fushun ranked the lowest of all.
The highest-ranked cities present a mixed picture in their status of urbanisation. Some have lagged behind and will only converge with the national trend in a few years, including the less-developed Suqian and Lianyungang, within the wealthy province of Jiangsu. Capital cities of central and western provinces, such as Chengdu (Sichuan), Yinchuan (Ningxia) and Nanning (Guangxi), have improved in the rankings with better prospects for GDP and migration, although none of these cities made our top 20 this year.
We forecast population growth across all ranked cities to be weaker than recent historic averages, as Chinese society undergoes further ageing. Several cities in our portfolio—mainly in the north-east, including Daqing, Harbin and Qiqihar (all Heilongjiang), Jilin (Jilin), Fushun (Liaoning) and Taizhou (Zhejiang)—are expected to record negative population flows in 2017-21.
We still expect first-tier cities to experience steady expansion in their metropolitan populations, despite policies enacted in Beijing and Shanghai to cap their population growth. These two cities, along with Shenzhen (Guangdong), will remain attractive because of their high levels of job creation, especially in the services and emerging technology sectors. We expect their living standards to remain ranked as the highest nationwide, measured primarily by access to education and healthcare.
Growth trajectories for metropolitan populations will diverge significantly over a longer timeframe. Comparing our 2016 estimate and 2030 forecast, the largest population gains will continue to be concentrated in the megacities, although the magnitude and pace of this expansion will be much smaller than in years past. We anticipate a 3m increase in Beijing's metropolitan population by 2030, to 22.4m. In contrast, some cities will shrink by 2030, mostly in the north-east. We expect Harbin, for example, to see a decline of 374,000—the largest contraction in the country.
Cities in central China have seen the largest expansion in consumer markets, supported by rising incomes and consumption. Initiatives such as the establishment of the China (Hubei) Pilot Free-Trade Zone in March 2017 (covering Wuhan and Xiangyang) may provide some policy tailwinds. Zhangjiakou in Hebei is among the main recipients of investment related to the Beijing-Tianjin-Hebei ("Jing-Jin-Ji") agglomeration programme, and is expected to receive additional investment from the central government related to tourism and infrastructure, as part of its role in hosting the 2022 Beijing Winter Olympics.
At the top of our forecast for consumption growth is Huainan (Anhui), where strong investment in transport infrastructure will underpin consumption. Foshan and Zhongshan (both Guangdong) are also on the list; the two cities have been buoyed by the local automotive and advanced manufacturing industries.
Other important measures of a city's growth potential include its size and hardware. We have used urban area and FAI to reflect growth in infrastructure and property
The exceptional growth in the built-up area of Dongguan (Guangdong), up by more than 800 per cent in 2011-15, is related to an expansion of its prefectural boundaries to include several suburban areas and development zones. Jilin (Jilin) and Hohhot (Inner Mongolia) also make the top ten, driven by newly built industrial zones. However, in late 2017 officials suspended several metro and highway projects in Inner Mongolia, due to concerns over debt financing. There is a risk that Inner Mongolia may stall investment in its local infrastructure over the next few years.
Meanwhile, Wuhan shrank in physical size in 2011-15, highlighting the limits that many Chinese cities are reaching in their planned urban expansion. Other cities registering negative growth include Quanzhou (Fujian), Nanning and Huizhou (Guangdong).
In terms of FAI growth in 2011-15, Suzhou tops the list; investment has poured into emerging industrial sectors including information technology, Big Data and e commerce. We have ranked Urumqi (Xinjiang) second, because of its recent efforts to pour money into infrastructure and the energy industry, as part of both the national Belt and Road Initiative and the national drive to develop renewable-energy technology. In contrast, FAI in several north-eastern cities (Daqing and Qiqihar in Heilongjiang, and Dalian, Fushun, Yingkou and Jinzhou in Liaoning) declined in 2011-15, highlighting the enduring challenges facing efforts to revive the struggling region.