Chinese Cities of Opportunity Executive Summary the Opportunity of China’S New Urbanisation

Tianjin Hangzhou Wuhan Chongqing Shenyang Xiamen Guangzhou Xi’an Dalian Qingdao Shenzhen Urumqi Nanjing Zhengzhou Nanning

Chinese Cities of Opportunity Executive Summary The opportunity of China’s new urbanisation

Urbanisation is the cornerstone of modern civilisation. In There is no lack of consultation reports and academic papers 2011, China’s urban population exceeded 50% of the national on Chinese urbanisation. Employing an original research total for the first time, reaching 51.27%, marking a significant methodology, PwC’s Chinese Cities of Opportunity gives a milestone in the country’s urbanisation development. China’s new perspective to urbanisation development in China. urbanisation rose further in 2012 to 52.57%, in line with the Methodologies used for the research on other global key cities global average. in recent years have been applied to China in this report. We looked at 15 Chinese cities, using 10 indicators to assess In the past three decades, China has remained the country their competitiveness, influence and growth potential. These with the fastest urbanisation rate in the world. When findings will provide a better understanding of each city’s economic reforms were introduced in 1978, urban residents unique strengths and characteristics, serving as a learning only represented 17.92% of China’s total population. In other platform for all 15 of them. While these cities were ranked words, more than 80% of Chinese people lived in rural areas. in terms of their economic development, the findings in this With the economic boom brought about by China’s reform and report, as with any other index-based rankings, by no means opening-up policy, over 50% of the population now live and are an appraisal of their performance. These cities face work in cities. Given the sheer size of China’s population, this different development conditions and are at different stages dramatic social change is no mean feat in the history of human of development. The speed of development also varies from civilisation. However, rapid urbanisation has triggered a series city to city. So what is more important for these cities is to of challenges, which include air pollution, underdeveloped understand ways to maximise their advantages and overcome public utilities in urban area, insufficient public facilities, their disadvantages in order to explore their full potential. soaring property prices, and an imbalanced re-distribution of public resources arising from the current urban-rural dual China Development Research Foundation (CDRF) is deeply system. honoured to have had the opportunity to be involved in the development of this report. I would also like to express my Urbanisation is an inevitable process for China as it embarks sincere appreciation and admiration for PwC’s active corporate on its modernisation drive. There are two ways to further responsibility programme and its contribution towards China’s the process of urbanisation. One is to continue with the old development and progress. Many thanks to the PwC and “quasi-urbanisation” model, which is characterised by heavy CDRF teams for their hard work in completing Chinese Cities of investment and high energy consumption at the cost of a well- Opportunity. rounded 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.

Lu Mai Secretary-General of China Development Research Foundation

1 Chinese Cities of Opportunity Finding the path to new urbanisation with China

Since 2007, PwC US and the Partnership for New York City It is PwC China’s great honor to have the generous support have jointly produced the Cities of Opportunity report. This of the research team of the China Development Research study examines current social and economic performance Foundation (CDRF), which helped us successfully complete indicators of the world’s leading cities while hoping to share the report. This is another key collaboration with CDRF lessons for building a more prosperous urban future. In 2012, after the joint survey report, Choosing China: Insights from the study looked at 27 cities worldwide, including New York, multinationals on the investment environment, launched in the London, Toronto, Paris, Stockholm, Singapore, Tokyo, Sydney, China Development Forum last year. and Seoul. The report also examined three major Chinese cities (Beijing, Shanghai, and Hong Kong). In that survey, Beijing was PwC China has also interviewed several international and local ranked the number-one city in terms of economic clout. scholars, entrepreneurs, and industry experts for the study. These interviews have added significant depth to our survey, Analysis of the Chinese cities in the report prompted PwC and I would like to thank everyone for their contributions. China to consider the possibility of developing a “China study” of Cities of Opportunity—an idea that was enthusiastically We hope that this year’s Chinese Cities of Opportunity report is embraced by our Beijing team. The study applied the same only a beginning. Going forward, with our growing research methodologies as the Cities of Opportunity report, but featured experience, PwC China will continue to provide observations 15 Chinese cities (excluding Beijing and Shanghai) as its target and insights on China’s urbanisation, hoping to be able to make cities. In order to ensure data consistency and availability, some modest contribution to the process of China’s economic the study surveyed the development of the Chinese cities on development and social progress. 10 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 Dennis Nally opportunities available in them. Chairman, PwC

PwC 2 Overview

When we decided to study and analyse Chinese cities using the same City selection methodology applied to the sample of 27 cities in the global report, our first question was which criteria to base on China is a vast country with a long and population size, economic development in selecting the cities in China for this rich history, with a varied topography or the criteria of financial characteristics research. In the midst of answering this and diverse traditions. Since China’s and cultural features as adopted in the question, we realised that it was more reform and opening-up policy, many global report, it would make the task very difficult and complex to determine which Chinese cities have experienced rapid difficult. At the end of 2012, mainland Chinese cities to include in our sample growth, with each city developing their China consisted of 4 municipal cities than to decide on the international cities own unique industrial base, cultural and 285 cities of prefecture levels and to be included in the global report. environment, natural endowment and above. The selection scope was initially influence. Therefore, if we were to restricted to the 4 municipal cities, 5 select a sample of Chinese cities based on cities listed independently in the state plan, and 27 provincial and autonomous regional capitals. Basing the selection next on our expectations for China’s CBD, Tianhe district, Guangzhou future urban agglomeration pattern, we came up with 6 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 15 cities as subjects for Chinese Cities of Opportunity. These cities were (in the order that the Chinese administrative divisions are listed) Tianjin, Shenyang, Dalian, Nanjing, Hangzhou, Xiamen, Qingdao, Zhengzhou, Wuhan, Guangzhou, Shenzhen, Nanning, Chongqing, Xi’an and Urumqi. From a geographical point of view, we selected 9 cities from Eastern China and 6 cities in Central and Western China. Alternatively, using the Yangtze River as a divider, 7 of the chosen Chinese cities

3 Chinese Cities of Opportunity 14 Urumqi

8 Shenyang

Tianjin 5 10 Dalian

12 Qingdao

13 Zhengzhou Xi’an 9

3 Nanjing

Wuhan 4 6 Hangzhou Chongqing 11

7 Xiamen

2 Guangzhou Nanning 15 1 Shenzhen

are to the north of it and the rest are to Beijing and Shanghai, which were Shandong province was selected because the south. These cities are important already included in the Cities of of its economic and trade relations with hubs within China’s economic network, Opportunity 2012 global report and Japan and South Korea in Northeast as well as key channels for international evaluated based on the same criteria, Asia. In Central China, we selected economic exchange. Coincidentally, were excluded from our latest scope of Zhengzhou and Wuhan. Zhengzhou is PwC has offices in 11 of these 15 research. More importantly, as Beijing the largest city in the Central Plains, and surveyed cities, which indicates that the and Shanghai are huge international is right at the core of the development establishment of PwC’s China offices is Chinese cities, they face a vastly different strategy of the “Rise of Central China in line with the course of China’s reform set of challenges and opportunities Plan”. Wuhan, a major transportation and opening up. The word “opportunity” than other cities in China. As such, hub and an important base for heavy in Chinese Cities of Opportunity refers to any comparison is unlikely to yield industry, also made the cut. Wuhan, the chance to take up opportunities for meaningful results. a major transportation hub and an globalisation purposes amidst the global important base for heavy industry, also economic recovery. It also refers to the Most of the targeted cities in this report made the cut. From Western China, we opportunities to participate in “Chinese- are from Eastern China primarily selected four targets, namely Urumqi, style urbanisation”, a trend that will have because they have a comparatively the hub of China’s new Silk Road as well a decisive effect on resource allocation, greater influence in the country. We also as the country’s Northwestern gateway; as forecast in the Third Plenum of the exercised discretion in our selection of Xi’an, an ancient capital; Chongqing, 18th CPC Central Committee. These the cities in Eastern China. For example, an important Southwestern city; and are opportunities for all cities in China. we chose Xiamen in Fuzhou province Nanning, the city with the most direct These 15 cities are a selected sample for its strategic influence on cross-strait economic and cultural links with ASEAN group for our research. exchanges and cooperation; Qingdao in (Association of Southeast Asian Nations) countries.

PwC 4 Based on data pertaining to each variable Research methodology and data sources that we collected for each city, we assigned scores (from highest to lowest) to each of the 15 cities. 15 being the highest score (the best performance) and 1 being the lowest score (the worst performance). In the case of a tie, the cities were assigned the same score. While it is unrealistic to have the perspectives between Chinese and research on Chinese cities adopt the global cities, the following 4 variables After scoring and ranking the 60 same evaluation system used in the from the global report were redefined variables, we allocated variables to the global report, we have made efforts for the Chinese report: “Political 10 indicators. Within every indicator, to maintain the overall integrity of environment”, “Ease of entry: the we summed up the total scores for each the framework within the localisation number of countries with visa waiver”, variable to obtain the final scores for the process. This includes the setting up of “Ease of entry: the number of foreign 10 indicators of each city. Final scores the 10 indicators used in the global study embassies or consulates” and “Total tax were then aggregated on this basis that as well as a number of variables within rate”. For example, we replaced “Political resulted in the final rankings. each indicator. These 10 indicators are: environment” with “Administrative transparency”. We hope to construct a general and • Intellectual capital and innovation objective evaluation system to provide All data used in this report was obtained the Chinese government with references • Regional city gateway through publicly available sources, with and suggestions for their policy • Technology readiness references to government statistics formulation and development plans and publications. These included data under the “New Urbanisation” scheme. • Health, safety and security from the National Bureau of Statistics, This is also aimed at establishing a • Transportation and urban planning statistical yearbooks issued by the foundation for future analysis of Chinese various cities, statistical bulletins and cities through an authentic and reliable • Sustainability and the natural reports issued by institutions affiliated research methodology. environment with the national government, the blue • Demographics and livability book and green paper series issued by the Social Sciences Academic Press, • Economic clout academic reports from authoritative • Ease of doing business institutions and statistical data from industry associations. Data from the • Cost 2012-2013 period was used in certain Based on these indicators, we explored cases. a number of deeper issues, including regional management, education, urban It is inevitable that differences in landscapes, sustainable development, scores may arise from quantitative data traffic congestion, urban conservation. analysis, which ultimately affects the Chinese Cities of Opportunity used the sample cities’ rankings. We decided at same variables as those adopted in Cities the outset that we would use a scoring of Opportunity 2012, with a total of 60 system for transparency and simplicity variables. As there are different research purposes.

5 Chinese Cities of Opportunity Observation findings on the 15 cities

After all 60 variables were rated, Shenzhen emerged with the highest overall score, receiving top scores for 5 out of 10 indicators. Shenzhen’s urbanisation history only went back 30- plus years from its humble beginning Financial center plaza, Luohu district, Shenzhen as a fishing village, making its case the most unusual of China’s urbanisation development. As the city borders Hong It is interesting to note that Shenzhen has its geographical advantages having Kong, the late Chinese leader Deng only had 30 years of urban history while helped in the facilitation of cross-strait Xiaoping designated Shenzhen an Guangzhou and Nanjing had a much exchanges. Shenyang, an old industrial “experimental field” at the beginning of longer history at it. Guangzhou began base, faces challenges amidst China’s China’s reform and opening up. Even to urbanising more than 2,200 years ago economic transition and modernisation this day, Shenzhen’s urban construction during the Qin Dynasty. Nanjing, known drive. However, the city’s outstanding framework is built on the core ideology as the “ancient capital” for six dynasties, performance in the “Transportation and of emancipated thinking and innovative has a history spanning over 2,470 years. urban planning” indicator highlighted practices. This won Shenzhen the title its recent immense progress. Xi’an’s of an “urban construction miracle”. The Wuhan, Tianjin, Hangzhou, Xiamen, “Cost” indicator score showed its clear city’s growth also reflects the “China Shenyang and Xi’an ranked in the middle advantage in this area and the city’s miracle”. among the 15 cities. Wuhan topped this “Technology readiness” indicator score band, scoring the highest for the “Health, came close to those of the leading cities Guangzhou and Nanjing, two well- safety and security” indicator while in this study. known historical cities, came in second receiving average scores for most other and third respectively. Together with indicators. Dalian, Chongqing, Qingdao and Shenzhen, they are China’s leading cities. Zhengzhou made the third band with Tianjin is one of China’s earliest their scores. Owing to its geographical Guangzhou scored high in most of the municipal cities. While Tianjin scored location, Dalian is the sea port for China’s indicators even if it did not top any quite highly in the indicators, the Northeastern region. While its scores particular one of them. Because of this, points were not enough to make the in the “Health, safety and security”, Guangzhou’s total score was only slightly top rankings of this study. Hangzhou, a “Economic clout” and “Cost” indicators less than Shenzhen’s. As for Nanjing, traditional tourist destination, also needs were relatively high, the city scored it topped the rankings for both the to improve its overall economic strength lesser in other indicators. With its long “Intellectual capital and innovation” and in the region. Even as a relatively small history, Chongqing in the Southwestern “Demographics and livability” indicators, city, Xiamen played an important role part of China, garners much attention as suggesting that there’s a new-found in China’s opening-up policy, with one of the four municipal cities. It scored vitality even in the historical city. relatively high for the “Sustainability and

PwC 6 the natural environment”, “Economic clout” Urumqi and Nanning made the lowest band of and “Cost” indicators but there is room for this study because they received low scores in improvement in the other indicators. Qingdao’s many of the indicators. Urumqi and Nanning scores were in the mid-to-low range for the had average scores for the “Cost” indicator. “Regional city gateway” and “Technology While Urumqi scored better in the “Regional readiness” indicators. Zhengzhou’s score was city gateway” indicator, Nanning had a better low in 5 indicators: “Regional city gateway”, performance in the “Sustainability and the “Technology readiness”, “Sustainability and natural environment” indicator and the “Fiscal the natural environment”, “Demographics and balance” variable which is under the “Ease of livability” and “Economic clout”. doing business” indicator.

Intellectual capital Regional city gateway Technology readiness Health, safety and Transportation and Sustainability and Demographics and Economic clout Ease of doing business Cost Final score and innovation security urban planning the natural environment livability

1 Shenzhen 93 84 50 26 61 61 36 70 104 9 594 2 Guangzhou 97 78 43 48 54 53 44 68 92 16 593 3 Nanjing 115 47 45 49 59 38 48 47 68 50 566 4 Wuhan 86 61 29 54 55 28 39 52 90 58 552 5 Tianjin 87 58 30 29 64 40 40 67 75 43 533 6 Hangzhou 99 53 45 51 42 40 30 46 87 26 519 7 Xiamen 73 55 43 35 41 58 39 32 90 48 514 8 Shenyang 77 41 26 37 66 31 44 46 69 67 504 9 Xi’an 68 38 49 47 50 23 42 31 64 71 483 10 Dalian 66 31 34 48 49 43 22 52 68 60 473 11 Chongqing 38 71 17 27 48 58 19 55 60 63 456 12 Qingdao 67 35 22 45 35 46 25 51 70 55 451 13 Zhengzhou 62 29 21 42 41 27 21 29 58 71 401 14 Urumqi 39 33 15 30 41 18 20 44 43 55 338 15 Nanning 31 12 18 40 22 42 15 31 50 49 310

7 Chinese Cities of Opportunity East coast of Qingdao

PwC 8 Transportation and urban planning Sustainability and the natural environment Indicator rankings 1 Shenyang 66 1 Shenzhen 61 2 Tianjin 64 2 Xiamen 58 3 Shenzhen 61 2 Chongqing 58 at a glance 4 Nanjing 59 4 Guangzhou 53 5 Wuhan 55 5 Qingdao 46 6 Guangzhou 54 6 Dalian 43 7 Xi'an 50 7 Nanning 42 8 Dalian 49 8 Tianjin 40 9 Chongqing 48 8 Hangzhou 40 10 Hangzhou 42 10 Nanjing 38 11 Urumqi 41 11 Shenyang 31 11 Xiamen 41 12 Wuhan 28 11 Zhengzhou 41 13 Zhengzhou 27 14 Qingdao 35 14 Xi'an 23 15 Nanning 22 15 Urumqi 18

Intellectual capital and innovation Regional city gateway Demographics and livability Economic clout

1 Nanjing 115 1 Shenzhen 84 1 Nanjing 48 1 Shenzhen 70 2 Hangzhou 99 2 Guangzhou 78 2 Guangzhou 44 2 Guangzhou 68 3 Guangzhou 97 3 Chongqing 71 2 Shenyang 44 3 Tianjin 67 4 Shenzhen 93 4 Wuhan 61 4 Xi'an 42 4 Chongqing 55 5 Tianjin 87 5 Tianjin 58 5 Tianjin 40 5 Dalian 52 6 Wuhan 86 6 Xiamen 55 6 Xiamen 39 5 Wuhan 52 7 Shenyang 77 7 Hangzhou 53 6 Wuhan 39 7 Qingdao 51 8 Xiamen 73 8 Nanjing 47 8 Shenzhen 36 8 Nanjing 47 9 Xi'an 68 9 Shenyang 41 9 Hangzhou 30 9 Hangzhou 46 10 Qingdao 67 10 Xi'an 38 10 Qingdao 25 9 Shenyang 46 11 Dalian 66 11 Qingdao 35 11 Dalian 22 11 Urumqi 44 12 Zhengzhou 62 12 Urumqi 33 12 Zhengzhou 21 12 Xiamen 32 13 Urumqi 39 13 Dalian 31 13 Urumqi 20 13 Nanning 31 14 Chongqing 38 14 Zhengzhou 29 14 Chongqing 19 13 Xi'an 31 15 Nanning 31 15 Nanning 12 15 Nanning 15 15 Zhengzhou 29

Technology readiness Health, safety and security Ease of doing business Cost

1 Shenzhen 50 1 Wuhan 54 1 Shenzhen 104 1 Xi'an 71 2 Xi'an 49 2 Hangzhou 51 2 Guangzhou 92 1 Zhengzhou 71 3 Nanjing 45 3 Nanjing 49 3 Xiamen 90 3 Shenyang 67 3 Hangzhou 45 4 Dalian 48 3 Wuhan 90 4 Chongqing 63 5 Xiamen 43 4 Guangzhou 48 5 Hangzhou 87 5 Dalian 60 5 Guangzhou 43 6 Xi'an 47 6 Tianjin 75 6 Wuhan 58 7 Dalian 34 7 Qingdao 45 7 Qingdao 70 7 Urumqi 55 8 Tianjin 30 8 Zhengzhou 42 8 Shenyang 69 7 Qingdao 55 9 Wuhan 29 9 Nanning 40 9 Nanjing 68 9 Nanjing 50 10 Shenyang 26 10 Shenyang 37 9 Dalian 68 10 Nanning 49 11 Qingdao 22 11 Xiamen 35 11 Xi'an 64 11 Xiamen 48 12 Zhengzhou 21 12 Urumqi 30 12 Chongqing 60 12 Tianjin 43 13 Nanning 18 13 Tianjin 29 13 Zhengzhou 58 13 Hangzhou 26 14 Chongqing 17 14 Chongqing 27 14 Nanning 50 14 Guangzhou 16 15 Urumqi 15 15 Shenzhen 26 15 Urumqi 43 15 Shenzhen 9

9 Chinese Cities of Opportunity Transportation and urban planning Sustainability and the natural environment

1 Shenyang 66 1 Shenzhen 61 2 Tianjin 64 2 Xiamen 58 3 Shenzhen 61 2 Chongqing 58 4 Nanjing 59 4 Guangzhou 53 5 Wuhan 55 5 Qingdao 46 6 Guangzhou 54 6 Dalian 43 7 Xi'an 50 7 Nanning 42 8 Dalian 49 8 Tianjin 40 9 Chongqing 48 8 Hangzhou 40 10 Hangzhou 42 10 Nanjing 38 11 Urumqi 41 11 Shenyang 31 11 Xiamen 41 12 Wuhan 28 11 Zhengzhou 41 13 Zhengzhou 27 14 Qingdao 35 14 Xi'an 23 15 Nanning 22 15 Urumqi 18

Intellectual capital and innovation Regional city gateway Demographics and livability Economic clout

Technology readiness Health, safety and security Ease of doing business Cost

PwC 10 For further information

For further information on Chinese For media inquiries, please For inquiries about the research Cities of Opportunity, please contact: methodology, please contact: contact:

David Wu Jenny Yu Angeline Cheng PwC China Beijing Senior Partner PwC China Marketing and PwC China Advisory Strategy Consulting Communications Senior Consultant Associate Director PwC China Public Policy and Regulatory Affairs Leader +86 10 6533 8723 +86 10 6533 7409 +86 10 6533 2456 [email protected] [email protected] [email protected] Jeff Deng Jim Chen PwC China Marketing and Communications Consultant PwC China North Real Estate Industry Leader +86 10 6533 3567 PwC China Assurance Partner [email protected] +86 10 6533 2067 [email protected]

Jun Jin PwC China Advisory Strategy Consulting Partner +86 21 2323 3263 [email protected]

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