Understanding Chinese Tier Cities for Business

Years of economic reform varied from policy easing of foreign direct investment to promote entrepreneurship, China has developed into one of the world's leading economies. As such, the Beijing Olympics in 2008 serves as a new chapter milestone that means the beginning of China's third wave of economic growth - Industrial consolidation.

As such it is a good time to examine how the Chinese cities have developed according to the traditional tiered city system. If you highlight all the first and second tiered cities in China, you will understand how the Chinese government plans to develop China into the world's largest economy.

In the 1980s, instead of opening the whole of China, China as part of a financial risk mitigation strategy decided to develop special economic zones and open cities near the coast to foreign investment. Coastal Cities support import and export. Moreover, "posterior" test cities can develop economies of scale in transport infrastructure. Were also allocated resources from western China pulled and consolidated to support these strategically placed coastal cities clear for Beijing in the north, Shanghai in the middle and Guangzhou in the south, with Shenzhen serves as a gateway to Hong Kong.

As a result of shorter and better transport and communications infrastructure, expand economic development to nearby towns, gradually moving westward into China. Meanwhile, the Chinese government also developed pockets economic drivers particularly in various provincial capitals for timely introduction of economic growth in various areas. As such, cities begin their economic reforms at different stages and thus over time, this became known as the Chinese city tiered system of cities will connotation as the first, second, third or fourth class cities.

The Chinese city of tiered system is characterized by the city's population size of Shanghai, topping China's urban population chart for 20 million, followed by Beijing and Guangzhou with 17 million and 12 million. These large cities, fueled by domestic demand and consumption provided the platform for better living standards, better business and job opportunities and an international showcase for the world. But those cities now has a population cap challenge with stiff business competition which could reduce the high exponential growth that was seen earlier.

The third wave will see more of the second-tier cities in action. With more than 20 cities in this category, China has to develop these cities as the backbone of China's future economy. It is important to note that China will not remain as a low cost sweat shops and are absolutely ready to move up the value chain, concentrating its efforts on high-end industries, while eliminating or push low-medium end industries in its lower tiered cities especially with the third and fourth stages cities.

Already armed with a relatively medium to high disposable incomes and an average GDP per capita of RMB30000 these second tiered cities provides a lucrative opportunity for companies to apply Blue Ocean Strategy in Chinese domestic markets. Because of the Chinese emphasis on "Mian Zi" or "face" plus the lack of variation in luxury and branded goods in their cities, often the rich and wealthy from lower tiered cities make short trips to Beijing and Shanghai for their luxury shopping. Therefore, have your presence in the second layer cities offer greater proximity and convenience for those audiences.

China in recent 20 years is akin to a baby dragon game around his nest, test and test new ways of doing things, shows the world her head and wings. Now it's ready to get more of her world - the backbone akin second tiered cities.