Market Report: T2 China

Essential student recruitment data on China’s
expanding Tier 2 cities.

Where is the growth in China coming from?

Although China’s average gross domestic product (GDP) growth rate has been slowing down in recent years (e.g. 6.9% in 2017 compared to 10.6% in 2010 or 11.4% in 2005), it is still the second largest economy in the world, or the largest when measured on a purchasing power parity basis that adjusts for price differences. What’s driving that growth today is China’s mighty Tier 2 and 3 cities.

When examining the GDP per capita growth and employment figures, it’s clear to see that the balance has been shifting for the last decade, with China being less reliant on its megacities Beijing and Shanghai. In short, other cities are catching up and contributing more.

A recent report from The Brookings Institution confirms and expands on this trend: “We’ve classified 103 Chinese cities in our report into five unique categories based on their size, industrial composition and growth patterns.” Below are some of the report findings for each category.

2 Giants

  • Beijing and Shanghai are economically dominant.
  • 26 million workers live here.
  • The giants generate over US $1.6 trillion in real output.

Anchor Cities

  • 14 metro areas:
    • 9 provincial-level municipalities or provincial capitals (Chengdu, Hangzhou, Wuhan, Tianjin, Chongqing, Zhengzhou, Nanjing, Guangzhou, Changsha).
    • 5 coastal cities that are home to some of the world’s busiest container ports (Qingdao, Suzhou, Wuxi, Ningbo, Shenzhen).
  • Anchors create at least US $200 billion in real output.
  • Anchor cities accounted for a quarter of the nation’s GDP in 2016.

The Northeast Rust Belt

  • 6 metro areas (Shenyang, Harbin, Daqing, Changchun, Jilin, Dalian).
  • Struggling to counter the decline of the nation’s coal and steel industry.

Service Cities

  • 24 metro areas (including Xian, Jinan, Kunming).
  • Services account for a higher share of the economy than industry.
  • Most of these cities are mid-sized (average employment of 1.6 million and average GDP of US $106.9 billion).
  • Between 2000 and 2016, these cities doubled their labour force and quintupled GDP per capita.

Industry Cities

  • 57 metro areas.
  • Industry or manufacturing drives their local economy.
  • Employment and GDP figures are similar to those of Service Cities.

Brookings points out that “as China implements population caps in Beijing and Shanghai, it leaves little room for additional labour inflows” thereby perpetuating the trend of lost lustre for China’s megacities. Indeed, official statistics show negative growth for the permanent population figures in both cities for 2018.

…lost lustre for China’s megacities Beijing and Shanghai

Moreover, “the gap in average living standards (measured by GDP per capita) between the two Giants and other Chinese metro areas is also shrinking. Since 2000, GDP per capita in China’s 101 metro areas outside of Beijing and Shanghai rose twice as fast as in the two Giants.”

All the more reason for international student recruiters to head to China’s Tier 2 cities.

GDP in China's Tier 2 cities and their provinces

Let’s take a closer look at the GDP for the provinces and cities BMI visits on its roadshows. The corresponding charts show GDP as of the end of 2017.

Updated figures for each city’s GDP at the end of 2018, according to CEIC Data, are as follows:

  • Hangzhou: 1,350.915 billion yuan
  • Chengdu: 1,534.277 billion yuan
  • Shenyang: 629.240 billion yuan
  • Wuhan: 1,484.729 billion yuan
  • Xi’an: 834.986 billion yuan
  • Jinan: 785.656 billion yuan

GDP Spotlight on Hangzhou: The Yangtze River metropolis

Hangzhou has seen years of stable economic growth. For example, in 2016 the city reported its GDP was 1,105 billion yuan (US $170.92 billion), a year-on-year increase of 9.5%, ranking first among sub-provincial cities in China. Its GDP was 2.8% higher than that of the whole country and 2% higher than Zhejiang province’s. In addition, the per capita GDP of its permanent resident population was 121,394 yuan, a year-on-year increase of 7.7%.

And according to more recent Hangzhou government reports, the city’s 2018 regional GDP was up 7% year-on-year and in the first half of 2019 it rose 6.9% to 694.9 billion yuan (US $100.97 billion). Meanwhile, as of 2018 per capita disposable income for urban residents was up 8.5% year-on-year to 61,000 yuan and up 9% to 33,000 yuan for rural residents.

A hotbed for talent, in 2019 Hangzhou became home to 1,075 new high tech enterprises and 711 new sci-tech startups. A strong magnet for overseas professionals, about 15,000 expats and over 5,000 foreign-funded companies have settled in the city.

GDP Spotlight on Chengdu: The capital of China's Southwest Sichuan province

Sichuan province reported a GDP of 4,067.8 billion yuan (US $597.9 billion) in 2018, rising 8% from the previous year. The provincial statistics bureau’s figures reveal that it only took three years for Sichuan to increase its GDP from 3 trillion yuan to 4 trillion yuan.

“Sichuan’s economic structure has been improving and its new growth drivers have been gaining momentum. in 2018, the service sector saw faster growth of 9.4%, contributing to over half of the GDP for the first time. Its industrial output grew 8.3% year on year, 2.1 percentage points higher than the national average. Its foreign trade surged 29.2% to 594.8 billion yuan. The per capita disposable income for Sichuan residents increased 7.3% in real terms to 22,461 yuan.”

Turning to the Sichuan capital of Chengdu, it’s clear to see the city as a main driver of growth for the region. Chengdu has seen phenomenal growth in recent years, going from a GDP of approximately US $83.4 billion (555.133 yuan) in 2010 to US $210 billion in 2017.

China's Tier 2 city's per capita disposable income

For another measure of China’s secondary cities, let’s explore average income levels, keeping in mind that China classifies middle income households as having a per capita disposable income of US $3,328, upper-middle income households of US $5,111 and high income households of US $9,607. When looking at urban households across China, those numbers are consistently higher, rising to US $4,998, US $6,682 and US $11,407 (respectively).

When we compare country averages to Tier 2 province averages, it’s clear to see that the Zhejiang province takes the cake, and its capital Hangzhou is the icing. Average wages and per capita disposable income are highest here, with the average person sitting comfortably above China’s upper-middle earnings bracket.

Average wages of employees in China's bustling Tier 2 cities

Given the large amounts of investment flooding into China’s Tier 2 cities, the jobs market is strong and spending remains high, particularly when it comes to securing the best possible education for the children of China’s wealthy workforce. For example, sources estimate that across all levels of education, approximately 12,000 to 15,000 students from the Zhejiang province are studying abroad and about 90% of them are self-funded.

The charts above looked at GDP per capita by province. For a more practical day-to-day sense of spending possibilities, here we reveal the average wages of employees in six of China’s Tier 2 cities.

With 18 unicorn companies, Hangzhou is the third biggest unicorn city by volume

According to Hurun Research Institute, in 2018 a new unicorn company (a start-up with a company value of over US $1 billion) was born every 3.8 days in China, making the country the second largest breeding ground for unicorns in the world, after the United States.

It probably won’t surprise you to learn that Beijing and Shanghai house the largest number of unicorns, 79 and 42, respectively. Beijing continued to hold its title by adding a whopping 25 new startups in 2018 alone.

And the city in third place?

Home to Alibaba, the e-commerce and tech giant, Hangzhou’s business-friendly reputation has enabled it to become the third most popular city for billion dollar businesses, with 18 companies headquartered there in 2018.

China’s biggest unicorns include:

  • Alibaba’s financial arm Ant Financial topped the list with a business value of more than 1 trillion yuan (US $148 billion),
  • followed by Chinese personalised news aggregator Toutiao (500 billion yuan),
  • and ride-sharing firm Didi Chuxing (300 billion yuan).

The country’s fastest-growing companies, which quadrupled their evaluations, were Toutiao; Kuaishou, a short video operator; and Meicai, an online fresh food platform.

Of the 186 companies in Hurun’s research, the majority (45) specialise in the network service industry followed by those in healthcare, education and artificial intelligence. Internet financial firms recorded the largest valuation with 1.6 trillion yuan in total.

Key dates for recruiting students in China's Tier 2 cities

Below is a quick overview of BMI's roadshow dates and cities. Mark your calendars and add the events to your itinerary via the links below or register directly to join us in China.
Asia, Chengdu, China, Hangzhou, Shenyang
Education Agents

New in 2019, our team will escort you to three of China's Tier 2 cities which are undergoing rapid expansion, yet are off the radar of many recruiters. In each city, you’ll hold a series of 13 private meetings and partake in networking events with student recruitment agencies from areas of China not often visited by overseas institutions, giving you fresh contacts and new partnership opportunities dotted across China’s landscape.

Learn more »
Event Location
Date
Price
Event Location

Hangzhou (10-11/11/2019)
Chengdu (12-13/11/2019)
Shenyang (15-16/11/2019)

Date

Nov 10 - Nov 16

Price
USD 11,000

Early bird rates end on Dec 06, 2019

Asia, China, Jinan, Wuhan, Xian
Education Agents

BMI's Agent Roadshow will introduce you to pre-screened agents in three of China’s Tier 2 cities which are full of recruitment potential, yet not often visited by foreign institutions. Through scheduled meetings and classy networking functions, you'll forge ties with new recruitment resources dotted across fresh territory in China.

Learn more »
Event Location
Date
Early Bird Price
Event Location

Wuhan (22-23/03/2020)
Xian (24-25/03/2020)
Jinan (26-27/03/2020)

Date

Mar 22 - Mar 27

Early Bird Price
USD 9,000

USD 11,000