Chinese Cities of Opportunity Executive Summary

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1 Chinese Cities of Opportunity Executive Summary Xi an

2 The opportunity of China s new urbanisation Urbanisation is the cornerstone of modern civilisation. In 0, China s urban population exceeded 0% of the national total for the first time, reaching.%, marking a significant milestone in the country s urbanisation development. China s urbanisation rose further in 0 to.%, in line with the global average. In the past three decades, China has remained the country with the fastest urbanisation rate in the world. When economic reforms were introduced in, urban residents only represented.% of China s total population. In other words, more than 0% of Chinese people lived in rural areas. With the economic boom brought about by China s reform and opening-up policy, over 0% of the population now live and work in cities. Given the sheer size of China s population, this dramatic social change is no mean feat in the history of human civilisation. However, rapid urbanisation has triggered a series of challenges, which include air pollution, underdeveloped public utilities in urban area, insufficient public facilities, soaring property prices, and an imbalanced re-distribution of public resources arising from the current urban-rural dual system. Urbanisation is an inevitable process for China as it embarks on its modernisation drive. There are two ways to further the process of urbanisation. One is to continue with the old quasi-urbanisation model, which is characterised by heavy investment and high energy consumption at the cost of a wellrounded development for China s people. Another is the new urbanisation model, which is inclusive, sustainable and aimed at improving the Chinese people s development and well-being. It is clear which option we should adopt. While there is still time to make adjustments at this interim stage of urbanisation, we need to be mindful of the necessity to step up on our research efforts and draw on useful references for policymaking. There is no lack of consultation reports and academic papers on Chinese urbanisation. Employing an original research methodology, PwC s Chinese Cities of Opportunity gives a new perspective to urbanisation development in China. Methodologies used for the research on other global key cities in recent years have been applied to China in this report. We looked at Chinese cities, using 0 indicators to assess their competitiveness, influence and growth potential. These findings will provide a better understanding of each city s unique strengths and characteristics, serving as a learning platform for all of them. While these cities were ranked in terms of their economic development, the findings in this report, as with any other index-based rankings, by no means are an appraisal of their performance. These cities face different development conditions and are at different stages of development. The speed of development also varies from city to city. So what is more important for these cities is to understand ways to maximise their advantages and overcome their disadvantages in order to explore their full potential. China Development Research Foundation (CDRF) is deeply honoured to have had the opportunity to be involved in the development of this report. I would also like to express my sincere appreciation and admiration for PwC s active corporate responsibility programme and its contribution towards China s development and progress. Many thanks to the PwC and CDRF teams for their hard work in completing Chinese Cities of Opportunity. Lu Mai Secretary-General of China Development Research Foundation Chinese Cities of Opportunity

3 Finding the path to new urbanisation with China Since 00, PwC US and the Partnership for New York City have jointly produced the Cities of Opportunity report. This study examines current social and economic performance indicators of the world s leading cities while hoping to share lessons for building a more prosperous urban future. In 0, the study looked at cities worldwide, including New York, London, Toronto, Paris, Stockholm, Singapore, Tokyo, Sydney, and Seoul. The report also examined three major Chinese cities (Beijing, Shanghai, and Hong Kong). In that survey, Beijing was ranked the number-one city in terms of economic clout. Analysis of the Chinese cities in the report prompted PwC China to consider the possibility of developing a China study of Cities of Opportunity an idea that was enthusiastically embraced by our Beijing team. The study applied the same methodologies as the Cities of Opportunity report, but featured Chinese cities (excluding Beijing and Shanghai) as its target cities. In order to ensure data consistency and availability, the study surveyed the development of the Chinese cities on 0 indicators, including intellectual capital and innovation; regional city gateway; technology readiness; health, safety and security; transportation and urban planning; sustainability and the natural environment; demographics and livability; economic clout; ease of doing business; and cost. By leveraging the research methodology and perspectives of the Cities of Opportunity report, the Chinese Cities of Opportunity report can provide an insightful perspective on Chinese cities development, as well as help to further explore the many opportunities available in them. It is PwC China s great honor to have the generous support of the research team of the China Development Research Foundation (CDRF), which helped us successfully complete the report. This is another key collaboration with CDRF after the joint survey report, Choosing China: Insights from multinationals on the investment environment, launched in the China Development Forum last year. PwC China has also interviewed several international and local scholars, entrepreneurs, and industry experts for the study. These interviews have added significant depth to our survey, and I would like to thank everyone for their contributions. We hope that this year s Chinese Cities of Opportunity report is only a beginning. Going forward, with our growing research experience, PwC China will continue to provide observations and insights on China s urbanisation, hoping to be able to make some modest contribution to the process of China s economic development and social progress. Dennis Nally Chairman, PwC PwC

4 Overview When we decided to study and analyse Chinese cities using the same methodology applied to the sample of cities in the global report, our first question was which criteria to base on in selecting the cities in China for this research. In the midst of answering this question, we realised that it was more difficult and complex to determine which Chinese cities to include in our sample than to decide on the international cities to be included in the global report. CBD, Tianhe district, City selection China is a vast country with a long and rich history, with a varied topography and diverse traditions. Since China s reform and opening-up policy, many Chinese cities have experienced rapid growth, with each city developing their own unique industrial base, cultural environment, natural endowment and influence. Therefore, if we were to select a sample of Chinese cities based on population size, economic development or the criteria of financial characteristics and cultural features as adopted in the global report, it would make the task very difficult. At the end of 0, mainland China consisted of municipal cities and cities of prefecture levels and above. The selection scope was initially restricted to the municipal cities, cities listed independently in the state plan, and provincial and autonomous regional capitals. Basing the selection next on our expectations for China s future urban agglomeration pattern, we came up with major regions: Northeast China, North China, Yangtze River Delta, Pan-Pearl River Delta, Central China and Northwest China. On this basis, we then selected the highly strategic central cities within these regions. Finally, under the guidance of CDRF, we selected the cities as subjects for Chinese Cities of Opportunity. These cities were (in the order that the Chinese administrative divisions are listed),,,,,,,,,,,,, Xi an and. From a geographical point of view, we selected cities from Eastern China and cities in Central and Western China. Alternatively, using the Yangtze River as a divider, of the chosen Chinese cities Chinese Cities of Opportunity

5 0 Xi an are to the north of it and the rest are to the south. These cities are important hubs within China s economic network, as well as key channels for international economic exchange. Coincidentally, PwC has offices in of these surveyed cities, which indicates that the establishment of PwC s China offices is in line with the course of China s reform and opening up. The word opportunity in Chinese Cities of Opportunity refers to the chance to take up opportunities for globalisation purposes amidst the global economic recovery. It also refers to the opportunities to participate in Chinesestyle urbanisation, a trend that will have a decisive effect on resource allocation, as forecast in the Third Plenum of the th CPC Central Committee. These are opportunities for all cities in China. These cities are a selected sample group for our research. Beijing and Shanghai, which were already included in the Cities of Opportunity 0 global report and evaluated based on the same criteria, were excluded from our latest scope of research. More importantly, as Beijing and Shanghai are huge international Chinese cities, they face a vastly different set of challenges and opportunities than other cities in China. As such, any comparison is unlikely to yield meaningful results. Most of the targeted cities in this report are from Eastern China primarily because they have a comparatively greater influence in the country. We also exercised discretion in our selection of the cities in Eastern China. For example, we chose in Fuzhou province for its strategic influence on cross-strait exchanges and cooperation; in Shandong province was selected because of its economic and trade relations with Japan and South Korea in Northeast Asia. In Central China, we selected and. is the largest city in the Central Plains, and is right at the core of the development strategy of the Rise of Central China Plan., a major transportation hub and an important base for heavy industry, also made the cut., a major transportation hub and an important base for heavy industry, also made the cut. From Western China, we selected four targets, namely, the hub of China s new Silk Road as well as the country s Northwestern gateway; Xi an, an ancient capital;, an important Southwestern city; and, the city with the most direct economic and cultural links with ASEAN (Association of Southeast Asian Nations) countries. PwC

6 Research methodology and data sources While it is unrealistic to have the research on Chinese cities adopt the same evaluation system used in the global report, we have made efforts to maintain the overall integrity of the framework within the localisation process. This includes the setting up of the 0 indicators used in the global study as well as a number of variables within each indicator. These 0 indicators are: Intellectual capital and innovation Regional city gateway Technology readiness Health, safety and security Transportation and urban planning Sustainability and the natural environment Demographics and livability Economic clout Ease of doing business Cost Based on these indicators, we explored a number of deeper issues, including regional management, education, urban landscapes, sustainable development, traffic congestion, urban conservation. Chinese Cities of Opportunity used the same variables as those adopted in Cities of Opportunity 0, with a total of 0 variables. As there are different research perspectives between Chinese and global cities, the following variables from the global report were redefined for the Chinese report: Political environment, Ease of entry: the number of countries with visa waiver, Ease of entry: the number of foreign embassies or consulates and Total tax rate. For example, we replaced Political environment with Administrative transparency. All data used in this report was obtained through publicly available sources, with references to government statistics and publications. These included data from the National Bureau of Statistics, statistical yearbooks issued by the various cities, statistical bulletins and reports issued by institutions affiliated with the national government, the blue book and green paper series issued by the Social Sciences Academic Press, academic reports from authoritative institutions and statistical data from industry associations. Data from the 0-0 period was used in certain cases. It is inevitable that differences in scores may arise from quantitative data analysis, which ultimately affects the sample cities rankings. We decided at the outset that we would use a scoring system for transparency and simplicity purposes. Based on data pertaining to each variable that we collected for each city, we assigned scores (from highest to lowest) to each of the cities. being the highest score (the best performance) and being the lowest score (the worst performance). In the case of a tie, the cities were assigned the same score. After scoring and ranking the 0 variables, we allocated variables to the 0 indicators. Within every indicator, we summed up the total scores for each variable to obtain the final scores for the 0 indicators of each city. Final scores were then aggregated on this basis that resulted in the final rankings. We hope to construct a general and objective evaluation system to provide the Chinese government with references and suggestions for their policy formulation and development plans under the New Urbanisation scheme. This is also aimed at establishing a foundation for future analysis of Chinese cities through an authentic and reliable research methodology. Chinese Cities of Opportunity

7 Observation findings on the cities After all 0 variables were rated, emerged with the highest overall score, receiving top scores for out of 0 indicators. s urbanisation history only went back 0- plus years from its humble beginning as a fishing village, making its case the most unusual of China s urbanisation development. As the city borders Hong Kong, the late Chinese leader Deng Xiaoping designated an experimental field at the beginning of China s reform and opening up. Even to this day, s urban construction framework is built on the core ideology of emancipated thinking and innovative practices. This won the title of an urban construction miracle. The city s growth also reflects the China miracle. and, two wellknown historical cities, came in second and third respectively. Together with, they are China s leading cities. scored high in most of the indicators even if it did not top any particular one of them. Because of this, s total score was only slightly less than s. As for, it topped the rankings for both the Intellectual capital and innovation and Demographics and livability indicators, suggesting that there s a new-found vitality even in the historical city. Financial center plaza, Luohu district, It is interesting to note that has only had 0 years of urban history while and had a much longer history at it. began urbanising more than,00 years ago during the Qin Dynasty., known as the ancient capital for six dynasties, has a history spanning over,0 years.,,,, and Xi an ranked in the middle among the cities. topped this band, scoring the highest for the Health, safety and security indicator while receiving average scores for most other indicators. is one of China s earliest municipal cities. While scored quite highly in the indicators, the points were not enough to make the top rankings of this study., a traditional tourist destination, also needs to improve its overall economic strength in the region. Even as a relatively small city, played an important role in China s opening-up policy, with its geographical advantages having helped in the facilitation of cross-strait exchanges., an old industrial base, faces challenges amidst China s economic transition and modernisation drive. However, the city s outstanding performance in the Transportation and urban planning indicator highlighted its recent immense progress. Xi an s Cost indicator score showed its clear advantage in this area and the city s Technology readiness indicator score came close to those of the leading cities in this study.,, and made the third band with their scores. Owing to its geographical location, is the sea port for China s Northeastern region. While its scores in the Health, safety and security, Economic clout and Cost indicators were relatively high, the city scored lesser in other indicators. With its long history, in the Southwestern part of China, garners much attention as one of the four municipal cities. It scored relatively high for the Sustainability and PwC

8 the natural environment, Economic clout and Cost indicators but there is room for improvement in the other indicators. s scores were in the mid-to-low range for the Regional city gateway and Technology readiness indicators. s score was low in indicators: Regional city gateway, Technology readiness, Sustainability and the natural environment, Demographics and livability and Economic clout. and made the lowest band of this study because they received low scores in many of the indicators. and had average scores for the Cost indicator. While scored better in the Regional city gateway indicator, had a better performance in the Sustainability and the natural environment indicator and the Fiscal balance variable which is under the Ease of doing business indicator. Intellectual capital and innovation Regional city gateway Technology readiness Health, safety and security 0 0 Xi an Chinese Cities of Opportunity

9 East coast of Transportation and urban planning Sustainability and Demographics and the natural environment livability Final score Ease of doing business Cost Economic clout 0 0 PwC

10 Chinese Cities of Opportunity Technology readiness Health, safety and security 0 0 Intellectual capital and innovation Regional city gateway Indicator rankings at a glance

11 PwC Ease of doing business Cost Demographics and livability Economic clout Transportation and urban planning Sustainability and the natural environment

12 For further information For further information on Chinese Cities of Opportunity, please contact: David Wu PwC China Beijing Senior Partner PwC China Public Policy and Regulatory Affairs Leader + 0 david.wu@cn.pwc.com Jim Chen PwC China North Real Estate Industry Leader PwC China Assurance Partner jim.chen@cn.pwc.com For media inquiries, please contact: Jenny Yu PwC China Marketing and Communications Senior Consultant + 0 jenny.h.yu@cn.pwc.com For inquiries about the research methodology, please contact: Angeline Cheng PwC China Advisory Strategy Consulting Associate Director angeline.cheng@cn.pwc.com Jeff Deng PwC China Marketing and Communications Consultant + 0 jeff.deng@cn.pwc.com Jun Jin PwC China Advisory Strategy Consulting Partner + jun.jin@cn.pwc.com This content is for general information purposes only, and should not be used as a substitute for consultation with professional advisors. 0 PwC. All rights reserved. PwC refers to the PwC network and/or one or more of its member firms, each of which is a separate legal entity. Please see for further details.

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