Savills China Chart Book Chart Book
Introduction Many people ask about the situation in China, whether in reference to the economy or the property market, and expect a one word response. China, however, is not just one market but thousands of markets and they are constantly evolving in very different ways, with national trends and government policies being mere threads that hold them all together. Many people also ask if are there still opportunities in China s property market, some respond that prices are too high, competition too fierce and that the opportunity to make money has passed. Veteran investors, on the other hand, are aware that there are always opportunities in a country that is still developing and has yet to reach its full potential. These opportunities are a consequence of China s diverse geography, climate, culture, and economy, and they only become apparent if you dig a little bit deeper. James Macdonald Head of China Research
Economy GDP GDP Breakdown by Expenditure, 1952 29 GDP Growth Breakdown by Industry, 1978 29 8% Household Consumption Gross Capital Formation Government Consumption Net Export of Goods and Service 5% Primary Industry Industry Construction Transport, Storage & Post Wholesale & Retail Trade Acc. and Catering Trade Banking and Insurance Real Estate Other 7% 45% 6% 4% 5% 35% 4% 3% 3% 25% 2% 2% 15% 1% 1% % 5% -1% 52 54 56 58 6 62 64 66 68 7 72 74 76 78 8 82 84 86 88 9 92 94 96 98 2 4 6 8 % 78 79 8 81 82 83 84 85 86 87 88 89 9 91 92 93 94 95 96 97 98 99 1 2 3 4 5 6 7 8 9 Over the last 6 years, household consumption has represented a decreasing percentage of the overall GDP by expenditure, falling to 35.1 per cent in 29. Meanwhile, gross capital formation has represented an increasing proportion, especially over the last five years and in 29 represented 47.7 per cent of GDP by expenditure. When looking at GDP by industry, general industry and specifically manufacturing make up the largest component, contributing 39.7 per cent in 29.
Economy GDP GDP, 28 vs 29 Average GDP by Tier City, 1997 28 1,6 bn 28 29 29 Nominal Growth 4 yr CAGR 4% 1,2 bn 1 2 3 4 5 1,4 35% 1, 1,2 3% 1, 25% 8 8 2% 6 6 15% 4 1% 4 2 5% 2 % 1997 1998 1999 2 21 22 23 24 25 26 27 28 China s GDP growth slowed to 9.2 per cent in 29 as a result of the global financial crisis, but recovered strongly in 21 recording a 1.3 per cent increase to 39.8 trillion. Nominal growth rates remained uneven however, with western cities such as Chongqing and Xi an recording stellar growth. Second tier cities are on average a quarter of the size of first tier cities. Going by historical growth patterns, it will take another six years for them to catch up.
Economy GDP per Capita GDP per Capita, 27 vs 28 Average GDP per Capita by Tier City, 27 vs 28 27 28 28 Nominal Growth 4 yr CAGR 14, 35% 27 28 28 Nominal Growth 4 yr CAGR 1, 25% 12, 3% 8, 2% 1, 25% 8, 2% 6, 15% 6, 4, 15% 1% 4, 1% 2, 5% 2, 5% % 1 2 3 4 5 % GDP per capita - much more indicative of the stage of development of a region - shows us that the western cities such as Chengdu, Chongqing and Xi an have a long way to go to compete with their eastern peers. Western cities GDP per capita at 2-3, is some 5 to 7 per cent lower than eastern second tier cities. The GDP per capita of first tier cities is not too different from a number of the second tier east coast cities, with Suzhou and Wuxi actually recording the highest out of the first and second tier cities.
Economy Tertiary Industry Tertiary Industry, 28 vs 29 Tertiary Industry as a Percentage of GDP, 28 vs 29 1, bn 28 29 29 Nominal Growth 4 yr CAGR 5% 8% 28 29 9 8 7 6 45% 4% 35% 3% 7% 6% 5% 5 25% 4% 4 3 2 1 2% 15% 1% 5% 3% 2% 1% % % First tier cities economic make-up is more geared towards the tertiary industry which accounts for roughly 62 per cent of GDP, compared to just 46 per cent in second tier cities. For fourth and fifth tier cities this ratio falls to 34 to 35 per cent with the secondary industry accounting for approximately 5 per cent and primary industry for roughly 1 to 15 per cent.
Economy Fixed Asset Investment (FAI) FAI, 27 vs 28 Average FAI by Tier City, 27 vs 28 6, billion 27 28 28 Nominal Growth 4 yr CAGR 6% billion 27 28 28 Nominal Growth 4 yr CAGR 35, 35% 5, 5% 3, 3% 4, 4% 25, 25% 3, 3% 2, 2% 2, 2% 15, 15% 1, 1% 1, 1% % -1, -1% 5, 5% 1 2 3 4 5 % First tier and eastern second tier cities have seen nominal FAI CAGR slow to roughly 1 per cent over the last four years while northern and western second tier cities recorded growth closer to 3 per cent. In general, the lower the tier city the lower the FAI but the higher the growth rate, with fifth tier cities growing by around 3 per cent.
Economy Retail Sales Retail Sales, 28 vs 29 Average Retail Sales by Tier City, 1998-29 6 billion 28 29 29 Nominal Growth 4 yr CAGR 3% 45 billion 1 2 3 4 5 5 25% 4 4 2% 35 3 3 15% 25 2 1% 2 1 5% 15 1 % 5 1998 1999 2 21 22 23 24 25 26 27 28 29 Retail sales growth recorded a moderate decrease in 29 after record growth rates were recorded in 28. Growth rates in first tier cities averaged 15.2 per cent in 29 compared with 18.7 per cent in second tier cities. The government continues to promote domestic consumption as they attempt to realign the economy away from an export driven growth model.
Economy Wages Wages, 27 vs 28 Average Wages by Tier City, 1997 28 6, 27 28 28 Nominal Growth 4 yr CAGR 3% 6, 1 2 3 4 5 5, 25% 5, 4, 2% 4, 3, 15% 3, 2, 1% 1, 5% 2, % 1, 1997 1998 1999 2 21 22 23 24 25 26 27 28 While wages in China remain low by international standards, economic growth and the inflationary pressure associated with it have been pushing up wages in recent years. Wage growth has been strongest in fourth and fifth tier cities followed by first tier cities over the last four years with CAGRs of 16.9, 17.7 and 15 per cent respectively; while second and third tier cities which are still witnessing robust migration have recorded more moderate growth of 14.1 and 14.3 per cent respectively. As companies increasingly locate a sizeable proportion of their operations to second and third tier cities and as migration slows in these cities wage, inflationary pressure should rise.
Economy Disposable Income Disposable Income per Capita, 28 vs 29 Average Disposable Income per Capita by Tier City, 28 vs 29 3, 28 29 29 Nominal Growth 4 yr CAGR 3% 3, 28 29 29 Nominal Growth 4 yr CAGR 18% 25, 25% 25, 15% 2, 2% 2, 12% 15, 15% 15, 9% 1, 1% 1, 6% 5, 5% 5, 3% % 1 2 3 4 5 % Disposable income grew at an average rate of 1 to 2 per cent in 21. Eastern second tier cities and first tier cities tend to have comparable disposable income levels at close to 22-25, per capita. Second tier cities not closer to the Yangtze River Delta tend to have incomes close to 15-2, per capita.
Economy Expenditure Per Capita & Savings Rates Expenditure per Capita, 27 vs 28 Savings Rates by Tier City, 27 vs 28 3, 27 28 28 Nominal Growth 4 yr CAGR 3% 35% 27 28 25, 25% 3% 2, 2% 25% 15, 15% 2% 1, 1% 15% 5, 5% 1% % 5% % 1 2 3 4 5 Although one of the government s main objectives is to encourage domestic consumption, growth in disposable income continues to outpace expenditure growth rates indicating that individuals continue to resort to saving. Savings rates in many cities are now above 25 per cent of disposable income with this level increasing lower down the tier level. Savings deposits rose to 19,537 per capita in 29 up from 4,735 per capita just ten years ago with total savings now at 26 trillion.
Demographics Urban Registered Population Urban Registered Population, 27 vs 28 Urban Registered Population by Tier City, 27 vs 28 14, ' 27 28 28 Nominal Growth 4 yr CAGR 14% 9, ' 27 28 28 Nominal Growth 4 yr CAGR 4.5% 12, 12% 8, 4.% 1, 1% 7, 3.5% 8, 8% 6, 3.% 6, 4, 2, -2, 6% 4% 2% % -2% 5, 4, 3, 2, 2.5% 2.% 1.5% 1.% -4, -4% 1,.5% 1 2 3 4 5.% While many statistics quote Chongqing as the largest city in China permanent population of 29 million according to CEIC Shanghai has the largest non-agricultural (urban) registered population in the country at 12 million by 28 followed by Beijing at 9.5 million and then Chongqing at 9 million. A number of factors make it very hard to get accurate data on population, including the sheer size of China, the flow of migrant workers, the antiquated Hukou system which often does not relate to where the person lives. Shenzhen has a registered (Hukou) population of 2 million with a permanent population of closer to 7 million. China was estimated to have over 122 cities with a population in excess of one million in 29.
Demographics Tourism Domestic Tourism, 27 vs 28 International Tourism, 27 vs 28 16, ' 27 28 28 Nominal Growth 4 yr CAGR 4% 9, ' 27 28 28 Nominal Growth 4 yr CAGR 3% 14, 12, 35% 3% 6, 2% 1, 25% 3, 1% 8, 6, 4, 2% 15% 1% -3, % -1% 2, 5% -6, -2% -2, % -5% -9, -3% -4, -1% -12, -4% International tourism is primarily limited to first tier cities such as Shenzhen, Shanghai, Guangzhou and Beijing. Shenzhen and Guangzhou receive a large number of day tourists and business travellers from Hong Kong. Beijing, with the appeal of major tourists sites, diplomatic visits and business meetings, comes in fourth in terms of international tourism after Shanghai. Day trips out of Shanghai to Hangzhou and Suzhou also contribute to their tourism markets. Travellers from Hong Kong, Taiwan and Macau accounted for close to 8 per cent of all foreign tourists in recent years, 18 million people in 21.
Demographics Tertiary Education Tertiary Education (no. of Enrolled Students), 27 vs 28 Average Tertiary Education (no. of Enrolled Students) by Tier City, 1997-28 1, ' 27 28 28 Nominal Growth 4 yr CAGR 25% 5 ' 1 2 3 4 5 8 2% 45 4 6 15% 35 4 1% 3 25 2 5% 2 % 15 1-2 -5% 5 1997 1998 1999 2 21 22 23 24 25 26 27 28 By 29 there were close to 26.9 million students enrolled in higher education. Wuhan, Nanjing and Xi an stand out as the largest university cities relative to their overall economy and population size. Beijing and Shanghai, however, maintain their top spot in terms of best university rankings. 52 of the top 5 ranked universities are located in Beijing, while Shanghai is home to 24.
Government Finances, Expenditure & Revenue Government Expenditure, 27 vs 28 Government Revenue, 27 vs 28 45, mn 27 28 28 Nominal Growth 4 yr CAGR 45% 45, mn 27 28 28 Nominal Growth 4 yr CAGR 45% 4, 4% 4, 4% 35, 35% 35, 35% 3, 3% 3, 3% 25, 25% 25, 25% 2, 2% 2, 2% 15, 15% 15, 15% 1, 1% 1, 1% 5, 5% 5, 5% % % Local government revenue rose to 3.2 trillion in 29 while expenditure rose to 6.1 trillion. The deficit was largely made up by transferring 2.8 trillion to local governments. While the national government recorded a surplus in 27, the two subsequent years have recorded deficits of 126 billion and 74 billion respectively. Most cities operate deficits as they are subsidised by the central government. However, out of the second tier cities, three ran surpluses in 28, namely Hangzhou, Suzhou and Wuxi.
Government Finances Government Deficit, 27 vs 28 Land Sales as a Percentage of Government Revenues, 28 vs 29 16, mn 27 28 28 Nominal Growth 4 yr CAGR 8% 8% 28 29 14, 7% 7% 12, 6% 6% 1, 5% 5% 8, 4% 4% 6, 3% 3% 4, 2% 2% 2, 1% 1% % % -2, 1 2 3 4 5-1% While all cities recorded an enlargement of deficits in 28, first tier cites, which have the largest deficits, have managed to start to bring this under control with a CAGR of -4.7 per cent. One of the drivers of the recent introduction of a property tax has been the large degree to which local government revenues depend on land sales. In 29, land sales contributed 3 to 4 per cent of revenue in first tier cities on average, while 3 to 6 per cent of revenue in second tier cities relied on land sales. The introduction of the property tax is expected to engineer a more stable and healthy property market.
Car Ownership Motor Vehicle Ownership, 27 vs 28 Motor Vehicle Sales, 1998 21 3,5 ' 27 28 28 Nominal Growth 35% 2 million units 3, 3% 18 16 2,5 25% 14 2, 2% 12 1,5 1, 15% 1% 1 8 6 5 5% 4 % 2 1998 1999 2 21 22 23 24 25 26 27 28 29 21 Motor vehicle ownership sky rocketed to 62 million units in 29. In 21, sales jumped 32 per cent year-on-year to 18 million units (US ~11 million units). Car ownership is redefining the property market, encouraging individuals to buy properties in suburban locations and opening up opportunities to big box retailers. Unlike the US, however, mass transit systems will continue to be used by the majority while cars will be seen as a luxury. 13 cities currently have an operational MRT system while a further 17 cities have a network under construction. The three largest networks in terms of length of track belong to Shanghai, Beijing and Guangzhou, each of which have recorded daily ridership levels in excess of six million people.
Beijing Guangzhou Shanghai Chengdu Chongqing Hangzhou Nanjing Shenyang Tianjin Wuhan Xian Changchun Changsha Fuzhou Guiyang Harbin Hefei Jinan Kunming Lanzhou Nanchang Nanning Shijiazhuang Taiyuan Urumqi Xining Zhengzhou Haikou Hohhot Yinchuan Doing Business in China Doing Business in China, 28 Doing Business in China by Tier City, 28 1 Starting a Business Registering Property Enforcing Contracts 3 1 2 3 9 8 25 7 6 2 5 4 15 3 2 1 1 5 Starting a Business Registering Property Enforcing Contracts The World Bank compiled a report in 28 looking at four areas of business regulation: starting a business, registering a property, getting credit and enforcing contracts. 3 cities were covered, 26 capital cities and four municipalities. The higher the rating the easier it was to do business. It is no surprise that on average first tier cities and municipalities perform better than second and third tier cities. A couple of cities do stand out however, namely Jinan and Fuzhou. Jinan is considered the fourth easiest city in which to start a business and register a property and the fifth easiest to enforce a contract.
Residential Property Investment Residential Investment, 29 vs 21 Average Residential Investment by Tier City, 2 21 16, 14, 12, 1, 8, 6, 4, 2, million 29 21 Nominal Growth 4yr CAGR 8% 7% 6% 5% 4% 3% 2% 1% % 1, 9, 8, 7, 6, 5, 4, 3, 2, million 1st tier 2nd tier 3rd tier -2, -1% 1, 2 21 22 23 24 25 26 27 28 29 21 Residential real estate investment increased in all first and second tier cities in 21, spurred on by a red hot sales market in 29 and developers healthy financials. After two years of flat investment, first tier cities saw investment jump by 37.3 per cent, led largely by Beijing and Shanghai. Second and third tier cities on the whole tended to record stronger growth than first tier cities with a four year CAGR of 22.3 per cent for second tier cities and 26.7 per cent for third tier cities compared with just 1.8 per cent in first tier cities.
Residential Property Floor Space Started Residential Floor Space Started, 29 vs 21 Average Residential Floor Space Started by Tier City, 2 21 6, ' sqm 29 21 Nominal Growth 4yr CAGR 12% 2, ' sqm 1st tier 2nd tier 3rd tier 5, 1% 18, 4, 8% 16, 3, 6% 14, 12, 2, 4% 1, 1, 2% 8, % 6, 4, -1, -2% 2, 2 21 22 23 24 25 26 27 28 29 21 The significant increase in investment consequently meant a similar increase in new starts a significant change in the trend for first tier cities with a growth rate of 42 per cent recorded. Third tier cities continued to record moderate increases in 21, growing by 36.2 per cent up from a four year CAGR of 19.1 per cent. Most notable increases were found in Fuzhou, Guiyang and Jinan, which all recorded increases of more than 1 per cent in 21.
Residential Property Floor Space Under Construction Residential Floor Space Under Construction, 29 vs 21 Average Residential Floor Space Under Construction by Tier City, 2 21 15, ' sqm 29 21 Nominal Growth 4yr CAGR 5% 6, ' sqm 1st tier 2nd tier 3rd tier 12, 4% 5, 9, 3% 4, 6, 2% 3, 3, 1% % 2, -3, -1% 1, 2 21 22 23 24 25 26 27 28 29 21 Despite an increase in floor space starts in first tier cities in 21 and an increase in total floor space under construction, for the first time in recent history the volume of space under construction in first tier cities was exceeded by second tier cities, which continued their rapid escalation in construction. Most notable cities included Chongqing which, while having the largest volume as a consequence of its large geographical area and permanent population, also recorded one of the fastest growth rates. Third tier cities lagged behind first and second tier cities with only 25 million sq m under construction per city, though there were notable exceptions such as Changsha and Zhengzhou, which recorded 54 and 45 million sqm under construction respectively.
Residential Property Floor Space Completed Residential Floor Space Completed, 29 vs 21 Average Residential Floor Space Completed by Tier City, 2 21 25, 2, 15, 1, 5, ' sqm 29 21 21 Nominal Growth 4yr CAGR 5% 4% 3% 2% 1% 2, 18, 16, 14, ' sqm 1st tier 2nd tier 3rd tier % 12, -5, -1% 1, -1, -2% 8, -15, -3% 6, -2, -4% 4, -25, -5% 2, 2 21 22 23 24 25 26 27 28 29 21 All city tiers saw a decrease in the volume of residential space completed in 21; the first year-on-year decrease for both second and third tier cities, but the second consecutive decrease for first tier cities. First tier cities on average see 1 million sq m of space completed each year, compared to 9 million sq m for second tier cities and just 4 million sq m in third tier cities. The northern second tier cities of Qingdao, Shenyang, Tianjin and Changchun bucked this trend recording a year-on-year increase in 21, along with Hangzhou.
Residential Property Floor Space Sold Residential Floor Space Sold, 29 vs 21 Average Residential Floor Space Sold by Tier City, 2 21 5, 4, ' sqm 29 21 Nominal Growth 4yr CAGR 5% 4% 25, ' sqm 1st tier 2nd tier 3rd tier 3, 2, 3% 2% 2, 1, 1% % 15, -1, -1% -2, -2% 1, -3, -3% -4, -4% 5, -5, -5% 2 21 22 23 24 25 26 27 28 29 21 21 was a tough year for the residential sales market coming on the back of 29. Transaction volumes fell dramatically in a number of cities, decreasing by up to 5 per cent on 29 highs. Again, the second tier cities in western China performed better. Northern cities of Qingdao, Dalian, Shenyang and Changchun recorded year-on-year growth, as did Xi an and Chongqing in the west. 21 was also the first year that second tier cities recorded more sales per city than first tier cities.
Residential Property Price Residential Price, 29 vs 21 Average Residential Price by Tier City, 2 21 2, 18, per sqm 29 21 Nominal Growth 4yr CAGR 5% 45% 16, per sqm 1st tier 2nd tier 3rd tier 16, 4% 14, 14, 35% 12, 12, 1, 3% 25% 1, 8, 2% 8, 6, 4, 2, 15% 1% 5% 6, 4, % 2, 2 21 22 23 24 25 26 27 28 29 21 Despite more robust sales and development activity in northern and western second tier cities, first tier cities and eastern second tier cities continued to record the strongest growth in prices. Beijing and Shenzhen both recorded growth of close to 3 per cent year-on-year, along with Hangzhou, Nanjing, Ningbo and Xiamen. A similar profile is given when looking at the four year CAGRs. Prices in first tier cities are, on average, double that of second tier cities, which are in turn 5 per cent more expensive than third tier cities.
Residential Property Price Growth Residential Price Growth by Tier, 21 21 1 st tier Average Residential Price, 2 21 45% 1st tier 2nd tier 3rd tier 2, per sqm Beijing Guangzhou Shanghai Shenzhen 4% 18, 35% 16, 3% 14, 25% 12, 2% 1, 15% 8, 1% 6, 5% 4, % 2, -5% 2 21 22 23 24 25 26 27 28 29 21 2 21 22 23 24 25 26 27 28 29 21 Price growth slowed dramatically in 28 as a result of the government s cooling efforts and the global economic crisis which affected China s manufacturing and export markets. The loosening of regulations and a sizeable fiscal and monetary stimulus package kick-started a recovery in the residential market in 29 causing prices to rise by 15 per cent on average. The pace of growth then accelerated in 21 to close to 25 per cent despite renewed government attempts to cool the market. While first tier cities tend to record the strongest price growth during expansionary periods, second and third tier cities have shown more consistent growth, with third tier cities managing to achieve 1 per cent growth even in 28.
Residential Property Tier Analysis Average Residential Land price by Tier City, 28 vs 29 vs 21 First Tier City Average Supply, Transaction & Price, 21 21 16, per sqm 28 29 21 ' sqm 25, Completed (LHS) Sold (LHS) Price (RHS) per sqm 2, 14, 12, 2, 16, 1, 15, 12, 8, 6, 1, 8, 4, 2, 5, 4, 1 2 3 4 5 21 22 23 24 25 26 27 28 29 21 First tier cities, which are at a later stage of their development, suffer from limited available developable land thereby limiting new supply and putting upward pressure on prices. Restricted land supply and fierce competition from developers have also placed upward pressure on land prices, which constitute a significant proportion of the cost. (Average first tier property prices are 15,2 per sq m while land prices are 14,1 per sq m.) Nevertheless, developers are increasingly looking at opportunities outside first tier cities due to increasing land costs, increased competition, tougher local government frameworks and lower development returns in first tier cities.
Residential Property Tier Analysis Second Tier City Average Supply, Transaction & Price, 21 21 Third Tier City Average Supply, Transaction & Price, 21 21 ' sqm 16, Completed (LHS) Sold (LHS) Price (RHS) per sqm 8, 7, ' sqm Completed (LHS) Sold (LHS) Price (RHS) per sqm 7, 14, 7, 6, 6, 12, 6, 5, 5, 1, 8, 6, 5, 4, 3, 4, 3, 4, 3, 4, 2, 2, 2, 2, 1, 1, 1, 21 22 23 24 25 26 27 28 29 21 21 22 23 24 25 26 27 28 29 21 Lower tier city governments have been considerably more receptive to developer and investors advances than first tier cities. International developers are becoming increasingly active in second tier cities while many national developers are well entrenched in second and third tier cities and are looking for opportunities in fourth and fifth tier cities, where competition is weak, costs are low and governments are more receptive. Lower tier cities offer the opportunity for a higher percentage increase in prices as they start from a lower base and have lower input costs, diversified property portfolios and strong fundamentals in particular migration, which the central government continues to encourage in lower tier cities to the detriment of first tier cities where growth is slowing.
China s First & Second Tier Cities in Detail
First Tier City Shanghai Province Shanghai Political Level Municipality Economic Region YRD US Equivalent New York Main Industries Financial services Retail and wholesale Real estate Drivers Heading up the largest economic region in China Headquarter economy (particularly MNCs) Skilled employee pool Transparent and efficient business environment Consumer market Outlook 22 international finance and shipping centre Continued urban sprawl Increasingly connected to the YRD region Permanent Population Units Value Growth Ranking Million 18.6 (.8%) 2 Land Area sq km 6,34-227 GDP 1,49 8.8% 1 GDP per Capita 8,198 9.7% 6 Actual FDI Retail Sales Disposable Income per Capita Expenditure per Capita USD 1.5 4.5% - 517 14% 2 28,838 8.1% 3 2,992 8.2% 5 Figures: 29
First Tier City Beijing Province Beijing Political Level Municipality Economic Region Bohai US Equivalent Washington Main Industries Electronic and communications equipment manufacturing Metallurgy Automobiles Drivers Political centre Headquarter economy (SOEs) Policy support (development of north east China) Skilled employee pool Largest grouping of high net worth individuals Outlook Limitations on development resulting from pollution and congestion Greater importance as primary city in Bohai economic zone Permanent Population Units Value Growth Ranking Million 17.2 4.6% 3 Land Area sq km 16,411-89 GDP 1,187 13.1% 2 GDP per Capita 68,788 9.1% 13 Actual FDI Retail Sales Disposable Income per Capita Expenditure per Capita USD 6.1.7% - 531 15.7% 1 26,739 8.1% 8 17,893 8.7% 13 Figures: 29
First Tier City Guangzhou Province Guangdong Political Level Province capital Economic Region PRD US Equivalent Los Angeles Main Industries Automobiles Electronics Petrochemicals Drivers Manufacturing and exports Consumer market Hongkongnese influence Stable growth market / down to earth Migrant city for western China Outlook Closer economic ties with Hong Kong Industry upgrading Better intercity transportation Permanent Population Units Value Growth Ranking Million 1.3 1.5% - Land Area sq km 7,434-216 GDP 911.3 1.9% 3 GDP per Capita 88,476 8.% - Actual FDI Retail Sales Disposable Income per Capita Expenditure per Capita USD 3.8 4.2% - 364.8 16.2% 3 27,61 9.% 5 22,82 9.5% 2 Figures: 29
First Tier City Shenzhen Province Guangdong Political Level Sub-provincial city Economic Region PRD US Equivalent Silicon Valley Main Industries Telecommunications Computers manufacturing Electronics Drivers Special Economic Zone (SEZ) Gateway to mainland China Young workforce Migrant city Electronics boom Shenzhen stock exchange Outlook Testing ground for political and economic reform The development of domestic financial and securities firms Permanent Population Units Value Growth Ranking Million 8.8 1.7% 9 Land Area sq km 1,992 2.% 277 GDP 82 5.% 4 GDP per Capita 92,771 3.3% 3 Actual FDI Retail Sales Disposable Income per Capita Expenditure per Capita USD 41.6 3.2% - 26 15.4% 4 29,345 9.4% 2 21,536 8.8% 3 Figures: 29
Second Tier City Changchun (CC) Province: Jilin Political Level Provincial capital Economic Region Bohai US Equivalent Detroit Main Industries Automobiles (incl. R&D) Agricultural product processing Pharmaceuticals Photo electronics Construction materials Energy industry Drivers Local companies have JVs with Audi, VW and Toyota. Likely to become the auto centre of China Outlook Prevalence of heavy industries will remain Efforts to push innovation in heavy industries in addition to plain manufacturing Permanent Population Units Value Growth Ranking Million 7.5.7% 18 Land Area sq km 2,64-58 GDP 285 11.2% 28 GDP per Capita 37,753 1.4% 45 Actual FDI Retail Sales Disposable Income per Capita Expenditure per Capita USD 2.4 - - 19. 15.2% - 16,72 7.1% - 13,49 5.4% - Figures: 29
Second Tier City Chengdu (CD) Province Sichuan Political Level Province capital Economic Region Sichuan Basin US Equivalent Denver Main Industries Finance Electronics IT Manufacturing Drivers Emergence of a bio-pharmaceutical industry Emerging R&D hub (AMD, Microsoft, IBM, Intel...) 133/5 MNCs present with more coming Major transport hub in the western region Key retail market in western China Outlook Increasing competition from Chongqing Massive expansion of its property sector (office and retail) Alternative model of economic growth that does not rely on manufacturing Permanent Population Units Value Growth Ranking Million 11.4 1.3% - Land Area sq km 12,121 (2.2%) 141 GDP 45.3 14.7% 13 GDP per Capita 39,5 - - Actual FDI Retail Sales Disposable Income per Capita Expenditure per Capita USD 2.8 24.6% - 195 2.2% 9 18,659 1.1% 47 14,88 9.6% 34 Figures: 29
Second Tier City Chongqing (CQ) Province: Chongqing Political Level: Municipality Economic Region: Sichuan Basin US Equivalent: Houston Main Industries Automotives, heavy industries and machinery Chemicals Consumer goods and processed foods (domestic) Major refining centre Vibrant defence sector Drivers Only municipality in western China and the world s largest municipality by population and area. Transportation hub - biggest inland river port Abundant natural resources (coal and natural gas) Third largest for automobile production and largest for motorcycles Home to Asia's largest aluminium plant and a number of steel plants Outlook Strong competition from Chengdu Heavy pollution and topography to remain major issues Likely to remain manufacturing powerhouse Permanent Population Units Value Growth Ranking Million 28.6.8% 1 Land Area sq km 82,826-5 GDP 653 12.7% 7 GDP per Capita 22,916 11.9% 13 Actual FDI Retail Sales Disposable Income per Capita Expenditure per Capita USD 4.2 46.7% - 248 18.6% 5 15,749 9.6% 81 12,144 8.9% 44 Figures: 29
Second Tier City Dalian (DL) Province: Liaoning Political Level Sub-provincial city Economic Region Bohai US Equivalent San Francisco Main Industries Electronics/hi-tech Tourism (rated most livable city by Forbes in 26) Major shipbuilding hub Machinery manufacturing Petrochemicals and oil refining Drivers IT and software industries, important exporter to Japan and South Korea Important business process outsourcing (BPO) location Largest airport in north eastern China Third largest port in China, largest petroleum port in China Second largest futures exchange in China (world top six) Outlook Cross river bridge/tunnel connecting Dalian and Shandong province is under planning Distinct mix of services and manufacturing Strategic location will play bigger role as Japan and South Korea emerge from the crisis Permanent Population Units Value Growth Ranking Million 6.2.7% 41 Land Area sq km 12,574-13 GDP 442 15% 14 GDP per Capita 71,833 13.7% 1 Actual FDI Retail Sales Disposable Income per Capita Expenditure per Capita USD 6. 2.2% - 139.7 18% 21 19,14 8.6% 43 15,33 8.7% 24 Figures: 29
Second Tier City Hangzhou (HZ) Province: Zhejiang Political Level Province capital Economic Region YRD US Equivalent Philidelphia Main Industries Tourism Light industry Textile IT Drivers Strong retail market Thriving residential market, equiv. to Shanghai in price Skilled labour Hot spot to live, shop and work especially for people in Zhejiang province Capital of Zhejiang, the wealthiest province in China Outlook Intercity high speed rail Home-grown market and increasing demand for tourism Likely to become model to reorient China s economy Largest number of top private enterprises (Taobao Group among others) will improve the city s competitiveness Permanent Population Units Value Growth Ranking Million 6.8.8% 27 Land Area sq km 16,596-87 GDP 51 6.6% 8 GDP per Capita 74,924 5.7% 8 Actual FDI Retail Sales Disposable Income per Capita Expenditure per Capita USD 4.4 8.5% - 18.5 16.% 11 26,864 14.1% 7 18,595 14.6% 7 Figures: 29
Second Tier City Nanjing (NJ) Province: Jiangsu Political Level Province capital Economic Region YRD US Equivalent Boston Main Industries Electronics Healthcare Petrochemicals Iron and steel Drivers Important economic zone, strong support from local authority Transportation hub in Eastern China and the downstream YRD Attractive location for MNC regional offices, such as Volkswagen, Iveco and Sharp Nation's capital prior to 1949 significant political attention National centre for education, research, tourism and transportation Outlook At the crossroads of the Beijing-Shanghai route. Likely to become the most important hub in the east Unexploited strategic advantages Permanent Population Units Value Growth Ranking Million 7.6.9% 17 Land Area sq km 6,582-223 GDP 423 12% 16 GDP per Capita 55,29 9.% 23 Actual FDI Retail Sales Disposable Income per Capita Expenditure per Capita USD 2.4 15.1% - 196.2 18.7% 8 25,54 14.2% 12 16,339 13.1% 17 Figures: 29
Second Tier City Ningbo (NB) Province: Zhejiang Political Level: Sub-provincial city Economic Region: YRD US Equivalent: Long Beach Main Industries Electrical products Textiles Food Industrial tools Drivers Good alternative base to Shanghai Flow-over effect from Shanghai s economic growth (Hangzhou Bay bridge will be the world s largest transoceanic bridge and will cut commuting time to Shanghai by 5 per cent) Fourth largest port in China (world s largest based on freight traffic of raw materials) Active domestic private economy (SMEs) Entrepreneurial spirit Outlook Better intercity infrastructure to stimulate growth Domestic enterprises will continue to be a major driver Logistics and the port to remain key to the city s economic prosperity Permanent Population Units Value Growth Ranking Million 5.7.6% 47 Land Area sq km 9,817-173 GDP 421 6.3% 17 GDP per Capita 73,998 5.7% 9 Actual FDI Retail Sales Disposable Income per Capita Expenditure per Capita USD 2.2 (13.1%) - 143.4 16% 19 27,368 8.6% 6 18,23 11.1% 9 Figures: 29
Second Tier City Qingdao (QD) Province: Shandong Political Level Sub-provincial city Economic Region Bohai US Equivalent Baltimore Main Industries Maritime engineering Electronics manufacturing Energy production Tourism Drivers Vibrant electricity generation from renewable energies especially wind power Fifth largest port in China, ninth in the world. Key target for Japanese and Korean investors (proximity) Variety of mineral deposits Home to local champions: Haier, Hisense and Tsingtao Outlook Development of the Jiaozhou Bay Diversified economy likely to accelerate growth as the world recovers from the crisis Fastest GDP growth rate in the last decade Permanent Population Units Value Growth Ranking Million 8.5 1.2% - Land Area sq km 1,978-157 GDP 489 1.2% 1 GDP per Capita 57,251 8.7% - Actual FDI Retail Sales Disposable Income per Capita Expenditure per Capita USD 1.9 (29.4%) - 174.3 19% 13 22,368 9.3% 26 16,8 7.2% 19 Figures: 29
Second Tier City Shenyang (SY) Province: Liaoning Political Level Province capital Economic Region Bohai US Equivalent Seattle Main industries Heavy industry, (aerospace, machine tools, automotive, heavy equipment and defence). Software Electronics Drivers Trying to reorient the economy towards the services and IT sectors Neusoft, one of the biggest Chinese software companies Many carmakers and related industries, such as Michelin Outlook Chinese government's "Revitalization of Northeast China" campaign Rapid development of software and auto-manufacturing industries Permanent Population Units Value Growth Ranking Million 7.8 1.3% 14 Land Area sq km 12,98-125 GDP 436 14.1% 15 GDP per Capita 55,816 12.3% 22 Actual FDI Retail Sales Disposable Income per Capita Expenditure per Capita USD 5.4 2.3% - 178 18.1% 12 18,56 9.1% 48 16,448 12.1% 15 Figures: 29
Second Tier City Suzhou (SuZ) Province: Jiangsu Political Level Sub-provincial city Economic Region YRD US Equivalent Newark Main Industries Tourism - Venice of the orient Electronics, IT, electrical machinery and household electrical appliances Bio-technology and medicine Chemicals Drivers Second largest industrial city in YRD Suzhou Industrial Park (SIP) Singapore and China JV. Home to 4 Fortune 5 companies Major FDI recipient Preferential policies Links Shanghai to Nanjing Outlook Intercity high speed rail Diversified economy and distinctive advantages will keep it on foreign investors radars Permanent Population Units Value Growth Ranking Million 7.5 - - Land Area sq km 8,488-195 GDP 774 15.6% 5 GDP per Capita* 122,565 - - Actual FDI Retail Sales Disposable Income per Capita Expenditure per Capita *28 figures USD 8.2 1.2% - 184.6 15.1% 1 26,32 1.3% 9 16,42 8.% 16 Figures: 29
Second Tier City Tianjin (TJ) Province: Tianjin Political Level Municipality Economic Region Bohai US Equivalent Chicago Main Industries Metallurgy and electronic information Automobile Renewable energy equipment Petrochemical industry, biotechnology and modern medicine Drivers Establishment of a free trade zone Pilot reforms in the financial sector Central government support on Binhai New Area Geothermal energy Largest port in north China Third largest city in China Outlook Closer relationship with BJ through high speed rail Predominance of emerging industries will be important as China tries to move up the value chain Permanent Population Units Value Growth Ranking Million 12. 4.9% 4 Land Area sq km 11,76-147 GDP 75 18.% 6 GDP per Capita 62,43 12.5% 16 Actual FDI Retail Sales Disposable Income per Capita Expenditure per Capita USD 9.1 19.7% - 243.1 21.5% 6 21,42 1.1% 28 14,81 1.3% 28 Figures: 29
Second Tier City Wuhan (WH) Province: Hubei Political Level Province capital Economic Region N/A US Equivalent Pittsburg Main Industries Automobile and machinery manufacturing Iron and steel industry Logistics - hub of maritime, river, rail and road transportation. Tobacco Pharmaceuticals Drivers Scientific and educational hub of central China Primary investors are from Japan, France and Hong Kong Retail consumption accounted for half of GDP in 29 Outlook Key economic development target for central China Increasingly important transportation axis, largest city in central China Permanent Population Units Value Growth Ranking Million 9.1 2.2% - Land Area sq km 8,494-194 GDP 456 15.2% 12 GDP per Capita 5,116 13.2% - Actual FDI Retail Sales Disposable Income per Capita Expenditure per Capita USD 2.9 14.1% - 216 17.% 7 18,385 1.% 5 12,71 11.7% 39 Figures: 29
Second Tier City Wuxi (WX) Province: Jiangsu Political Level Sub-provincial city Economic Region YRD US Equivalent Providence Main Industries Machinery and metallurgy Light equipment Electronics Textiles - silk-producing centre Drivers State-level micro-electronic high-tech industrial base Private enterprises are a major contributor to the city s economic growth Attempt to develop the largest solar city in China with two big solar companies (STP and JHL) Outlook Intercity high speed rail Leadership in new energy industries will make it an important target of the next five-year plan Permanent Population Units Value Growth Ranking Million 6.2 1.4% 4 Land Area sq km 4,788-247 GDP 499 13.% 9 GDP per Capita 81,151 14.9% 4 Actual FDI Retail Sales Disposable Income per Capita Expenditure per Capita USD 3.2 1.2% - 165.1 19.% 14 24,576 5.6% 16 15,619 8.7% 22 Figures: 29
Second Tier City Xiamen (XM) Province: Fujian Political Level Sub-provincial city Economic Region PRD US Equivalent Miami Main Industries Tourism Electronics Machinery Chemicals Fishing Drivers Dell Computer, Lenovo Computer, Prima TV, Amoi Electronics and NEC are the major investors Developing environmentally-friendly industries Strong ties with Taiwan Important investment capital from Hong Kong, Macau and Taiwan Outlook ECFA to encourage development of Taiwanese business in China (Xiamen to be a good base) Potential retirement town Permanent Population Units Value Growth Ranking Million 2.5 1.2% 152 Land Area sq km 1,569-2 GDP 162 8.% 61 GDP per Capita 69, 6.6% 14 Actual FDI Retail Sales Disposable Income per Capita Expenditure per Capita USD 1.7 (17.4%) - 48.9 16.7% 65 26,131 9.% 1 17,99 5.1% 1 Figures: 29
Second Tier City Xi an (XA) Province: Shaanxi Political Level Province capital Economic Region N/A US Equivalent Dallas Main Industries Telecommunications BPO Tourism Aerospace Education Equipment manufacturing Drivers Xi'an National Civil Industrial Base Telecommunications - Huawei, ZTE, CATT, NEC, Fujitsu and Siemens Low cost well educated populace Outlook Growing software industry Key city in the go west policy Major transportation hub Permanent Population Units Value Growth Ranking Million 8.4.8% 1 Land Area sq km 1,18-168 GDP 272 14.5% 3 GDP per Capita 32,351 13.6% 65 Actual FDI Retail Sales Disposable Income per Capita Expenditure per Capita USD 1.2 6.2% - 138 19.6% 22 18,963 24.6% 44 12,734 6.% - Figures: 29
Making Sense of China s Cities China US Equivalent Characteristics Hong Kong New York Business and financial capital Shanghai New York Business and financial capital Beijing Washington Political capital Guangzhou Los Angeles Major industrial city Shenzhen Silicon Valley Hi-tech/IT Changchun Detroit Heavy Industry automotives Chengdu Denver R&D in hi-tech/electronics Chongqing Houston Heavy industries/refining Dalian San Francisco Financial capital/emerging industries Hangzhou Philadelphia Ripple effect from major city Nanjing Boston National centre for education, ex-big city Ningbo Long Beach Large port close to large city Qingdao Baltimore Home to national powerhouses Shenyang Cleveland Aerospace, heavy equipment Suzhou Newark Links major cities, emerging industries Tianjin Chicago Trading centre Wuhan Pittsburg High retail consumption, large resources of fresh water Wuxi Providence Well rounded secondary city Xiamen Miami R&D in hi-tech/electronics, domestic tourism, shipping Xi'an Dallas Well educated, telecom industry
NOTES: All data, unless otherwise stated, is sourced from CEIC, which receives data directly from government institutions. The above data looks at municipalities and prefecture level cities only. A city s tier is based upon a number of factors including GDP, retail sales, FAI & FDI (first tier cities: four; second tier cities: 14; third tier cities: 26; fourth tier cities: 8; fifth tier cities: 163) This document is prepared by Savills for information only. Whilst reasonable care has been exercised in preparing this document, it is subject to change and these particulars do not constitute, nor constitute part of, an offer or contract; interested parties should not rely on the statements or representations of fact but must satisfy themselves by inspection or otherwise as to the accuracy. No person in the employment of the agent or the agent's principal has any authority to make any representations or warranties whatsoever in relation to these particulars and Savills cannot be held responsible for any liability whatsoever or for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this document.