Beijing Harbin Lanzhou Jinan Wuhan Ningbo Guangzhou Kunming Shanghai Shenyang Xi’an Qingdao Wuxi Fuzhou Shenzhen Guiyang Tianjin Dalian Taiyuan Zhengzhou Suzhou Xiamen Zhuhai Chongqing Urumqi Shijiazhuang Nanjing Hangzhou Changsha Chengdu

Chinese Cities of Opportunity 2018 Cities: Creating a beautiful life and new opportunities

In modern society, cities are the most Changsha-Zhuzhou-Xiangtan Region, offers a comprehensive evaluation of the important spaces in which people can the Guanzhong Plain urban cluster, competitiveness, influence and potential pursue a better life. China has the Chengdu-Chongqing Economic Zone, of urban development to provide largest urban population in the world. In the central-southern of Liaoning and benchmarks for overall urban 2017, over 58% of China’s population, or Harbin-Changchun urban cluster. development, and has come to exert an more than 800 million people, lived in People gravitate toward areas with extensive influence in China. On the cities, and the urbanisation rate for economic opportunities and high quality basis of Chinese Cities of Opportunity residents is increasing by over one public services. Therefore, enhancing 2017, the number of sample cities percentage point every year. The the inclusiveness, balance and observed this year has increased to 30, advancement of urbanisation has sustainability of the development of and special attention has been given to pushed forward the intensive and urban clusters with large cities is a the development of national strategic efficient use of resources, promoted significant undertaking at the core of regions such as Guangdong-Hong innovation and enabled the economy to resolving “the principal contradiction Kong-Macau Greater Bay Area and prosper, while providing better basic between unbalanced and inadequate Xiong’an New Area. Most of the 30 cities public services. Taken together, these development and the people’s ever- are central cities of the aforementioned features have laid the foundations of a growing needs for a better life” urban clusters. Through exploring urban better life for residents. proposed in the 19th CPC National characteristics and advantages, we are Congress. striving to set up an innovative approach Large cities and the urban clusters for urban social governance to build a centred on them have been playing a The Chinese Cities of Opportunity report, harmonious and beautiful China. greater role in providing opportunities jointly released by the China for people in changing their life chances, Development Research Foundation and The team of the China Development which justifies the designation: “Cities of PwC for five consecutive years, focuses Research Foundation participated in the Opportunity”. According to a recent on the industrial development, discussions at every stage of this report. study by the China Development innovation potential, coordinated The team regards it as an important Research Foundation, the proportion of regional development and the synergetic learning opportunity, while aiming to GDP of 12 urban clusters accounted for development of people’s life and add contributions and benefits. I would 71.34% of China’s total GDP in 2006 and ecological protection in China’s key like to take this opportunity to express increased to 82.03% in 2015. This cities. It is also the Chinese version of my appreciation and admiration to PwC reflects the trend of economic PwC’s Cities of Opportunity report on for actively taking on this socially opportunities gathering in large cities global urban development. Using the responsible undertaking, and dedicating and urban clusters. The 12 urban perspectives and analytical framework intelligence to China’s development, clusters reviewed cover the Yangtze of the global edition, and combined with along with my gratitude to PwC and the River Delta, Pearl River Delta, Beijing- the realities of China, the Chinese team for all their efforts. I hope we can Tianjin-Hebei Region, Western Taiwan version has built an indicator system of continue to deepen our partnership in Straits Economic Zone, Shandong the state of China’s development with the future, and jointly deliver valuable Peninsula, Central China, Wuhan, Chinese characteristics. The system intellectual products to society.

Lu Mai Vice Chairman and Secretary General China Development Research Foundation China’s innovation- driven development will boost the global economy

Welcome to the latest edition of PwC’s A city is a window into a country, and We appreciate the trust and support that Chinese Cities of Opportunity. Now an our findings relating to development of the China Development Research established fixture, this report is urban centres have shed light on the Foundation has given PwC over the last developed for the 5th year in tandem remarkable progress achieved across the five years. Such support enables our with PwC’s global annual assessment of nation since the initial implementation ongoing efforts in urban development urban development to provide an of the reform and opening up policy research in China, which underpins this evaluation of updates in influential cities began. Now, China’s cities are marching report. We look forward to continuing across China. confidently forward toward market- our study in this subject, while exploring oriented development, benefiting from and contributing to China’s ongoing In October, the 19th National Congress myriad innovations in institutions and drive in urbanisation. of the Communist Party of China set out industries. Of note, the establishment of the blueprints for future national Xiong'an New Area in 2017, represents a development. Due to China’s role in bold exploration of a fresh mechanism global economic and political progress, for coordinated regional urban the impacts following from the national development driven by innovation. development plans will have greater Xiong'an New Area is tasked with reach than ever before. A range of new driving the green development of the strategies and policies rolled out at the whole region, and reflects China’s National Congress will shape China’s efforts in this mode of urban approach to challenging major issues, development. At the 19th Party offer pathways for common Congress, President Xi Jinping proposed development that transcend national the building of a smart society in his boundaries, and critically, put forward report. Accelerating the construction of new goals for boosting urban smart cities along with the coordinated development in China, with effects that development of new urbanisation look could reverberate around the world. like two particularly crucial steps in pursuing this goal. An essential feature of PwC’s Chinese Cities of Opportunity report is the identification of areas of new growth potential in Chinese cities, which provides reference points for the building of a smart society.

Robert E. Moritz Global Chairman PwC Contents

Overview...... 2

Selection of cities...... 2

Assessment approach...... 3

Scoring method...... 3

Data sources...... 3

Observation results...... 4

In-depth interviews ...... 4 Comparison and analysis of Beijing, Shanghai, Guangzhou and Shenzhen...... 5

(Interview) Connie Wong Wai-ching: Studying the spirit of the 19th CPC National Congress and integrating urban development strategy into business operation...... 7

Comparison and analysis of ranking ...... 9

I. Intellectual capital and innovation...... 11

(Interview) Liu Hongxia: Complementarity between a research university and an intellectual-innovative city...... 13

II. Technical maturity...... 15

III. Major regional cities...... 17

(Interview) Wang Jianye: Cross-border flow of factors of production and governance modernisation...... 19 IV. Health, safety and public security...... 21

V. Transportation and urban planning...... 23

VI. Sustainable development and natural environment...... 25

(Interview) Bai Jiangong: Innovation poses a substantial challenge to corporate management...... 27

VII. Culture and quality of life...... 29

VIII. Economic clout...... 31

IX. Cost...... 33

(Interview) Zhang Yueguo: Deepening cooperation between Guangdong, Hong Kong and Macau to build a world-class bay area...... 35

(Interview) Zhou Ping: The Belt and Road Initiative and the construction of Guangdong-Hong Kong-Macau Greater Bay Area...... 36

X. Ease of doing business...... 37

Variables...... 39

Acknowledgements...... 44

For further information...... 45 1 PwC Cities have long been the epitome of economic development and social Overview advancement. A wide assortment of elements of a city hold opportunities for urban growth, including historical traditions, natural environment, industrial features and cultural resources, as well those that lie in the bigger picture amid reform and development. While keeping track of major cities around the world, PwC has been cooperating with the China Development Research Foundation since 2014, to select cities in China as samples for further comprehensive comparison and study. This year is the fifth year we publish Chinese Cities of Opportunity.

Selection of cities The preceding four reports had varied ranking-based comparison method that sample sizes, with 15, 20, 24 and 28 had been used in our prior reports to cities included for 2014, 2015, 2016 and compare all the cities together is less 2017, respectively. This trend points to appropriate this year. Therefore, this an increasing range that has broadened report differs from previous editions in annually. Also, these prior reports didn’t that the four cities of Beijing, Shanghai, include Beijing and Shanghai. This is Guangzhou and Shenzhen are studied because Beijing, Shanghai and Hong separately, while the other 26 cities are Kong have been studied by PwC from a ranked in sequence. Therefore, this global perspective. Given this, the global year, Chinese Cities of Opportunity 2018 observations on Beijing and Shanghai provides two observation results. One over the four consecutive years had been involves comparison between Beijing, listed in the Appendix of our reports. Shanghai, Guangzhou and Shenzhen. The other is a comparison of the 26 This year, we have introduced changes. remaining cities. These cities are Chinese Cities of Opportunity 2018 Harbin, Shenyang, Dalian, Urumqi, features observations on 30 cities Lanzhou, Xi’an, Taiyuan, Tianjin, including Beijing and Shanghai, as well Shijiazhuang, Jinan, Qingdao, as all cities reviewed in 2017. Given the Zhengzhou, Nanjing, Wuhan, Wuxi, huge size of the two new entrants, as Suzhou, Hangzhou, Ningbo, Fuzhou, well as the reality and actual influence Xiamen, Changsha, Zhuhai, Chengdu, of Guangzhou and Shenzhen, the Chongqing, Kunming and Guiyang.

Suzhou Photo by Ryan Yang (PwC)

Chinese Cities of Opportunity 2018 2 Assessment approach Scoring method government departments, statistical yearbooks and statistical bulletins of PwC’s assessment tools for urban The “score by rank” principle is used to every city, as well as survey findings of surveys are used in this report. The order results. In terms of the 26 authoritative think tanks, universities methods are similar to those typically aforementioned cities, a value and research institutions. The data are adopted for comparative study of cities, corresponding to each city is obtained sorted without being weighted. in that variables at several levels are under the same variable in a given employed to collect an extensive range dimension. Then, all values of different In determining observation variables, of data. However, this report uses more cities for this dimension are ranked from we give priority to statistical data and dimensions than in ordinary surveys, in the largest to the smallest. Subsequently, avoid questionnaire data, so that the an effort to provide a more detailed the city with the highest rank is given a data selected can reflect the observation picture of the cities involved. In total, 10 score of 26 points, the city with the angles in the most objective way. In dimensions are used and altogether 57 second highest rank is given a score of instances where single sources of data variables are employed, with a range of 25 points, and so on (where the score is don’t fully reflect the observation angle, four to seven variables in each opposite to its ranking); in the case of we turn to parameters with the same dimension. These dimensions indicate cities with the same ranking, the influencing factors to gather composite observation angles but are not weighted. corresponding score is the same. There data, in an effort to compile data that All variables are viewed equally, and are exceptions however, where the faithfully reflect the observation angle they form a subdivision of the ranking of a city is opposite to the score. as much as possible. observation angles. The number of This is the case for variables such as The majority of data has been collected variables in each dimension reflects the costs and resource consumption, where from the end of 2016, with some in 2017, difficulty in access of statistical data, a city with the lowest numeric value when a reliable source was available. In and, to some extent, the importance we takes the highest position and score, and instances where cities did not disclose attached to that dimension. so on. The ranking-based scoring sufficient data, data at the provincial method offers a simplification of the Given the limited data sources, the level has been used. These instances are otherwise complicated differences design angles of the variables of Chinese presented in the Appendix of the report. among cities that are separated by a Cities of Opportunity 2018 are slightly point. The sum total of scores for a city different from the previous edition, Observation results under the different variables in a given though the basic principles remain dimension is equal to the total score the The observation results for Beijing, unchanged. All design angles and data city is allocated in that dimension. The Shanghai, Guangzhou and Shenzhen sources of the variables can be found in final rank of all cities is determined by have Beijing at the top of the list, the “Variables” section of the report. comparing the sum of all the total scores followed by Shanghai and Shenzhen, In reality, social life is rich and of each city for every dimension. while Guangzhou is ranked last. We colourful. Cities differ, and the varied should point out that in the preceding The scores for Beijing, Shanghai, landscapes, historical changes, cultural four reports of Chinese Cities of Guangzhou and Shenzhen are also traditions and industrial layouts present Opportunity, Shenzhen ranked above determined by the same method. us with complex and fluctuating Guangzhou in the first and second phenomena. PwC’s assessment tools editions, and below Guangzhou in the seek to capture as many observation Data sources third and fourth issues, and now perspectives on the variety of aspects With regard to data selection, PwC outperforms Guangzhou again in this and diversity of actual life as possible. A assessment tools are distinguished for report. Please refer to the analysis for summary of the data from a range of their attention to the data’s objectivity, scores in specific dimensions. aspects ensures that comparison of cities comparability and feasibility. Sources of The results of the 26 other cities see gets as close to our visual impression as data are publically available, and Hangzhou ranked first, followed by possible. predominantly come from the National Wuhan, Nanjing, Chengdu, Xiamen, Bureau of Statistics, statistical results of Xi’an and Tianjin. These rankings are

3 PwC the same as the previous year. The dimensions defined in the report. The corporate operations, Mr. Bai has subsequent cities are Changsha, Suzhou, Chinese Cities of Opportunity, is not stimulated corporate growth and Zhengzhou, Zhuhai, Qingdao, Jinan, conducted for profit. Views of each established a national-level incubator Kunming, Chongqing and Ningbo. participant are entirely their own, and park. Mr. Bai applies his experience here Notably, Changsha is two places higher they have been shared freely to to share perspectives on innovation. than the previous year, and Qingdao contribute to a better understanding of Mr. Zhang Yueguo serves as surpassed Jinan, but Chongqing urban development. This year, Chinese President as well as Secretary of the dropped three positions. The bottom 10 Cities of Opportunity is privileged to Leading Party Members’ Group of the cities in sequence are Wuxi, Fuzhou, include perspectives from the following Guangzhou Academy of Social Sciences. Guiyang, Dalian, Taiyuan, Shenyang, distinguished professionals. His contribution pertains to Urumqi, Shijiazhuang, Harbin and Ms. Connie Wong Wai-ching, a development of the Guangdong-Hong Lanzhou. Compared to the previous businesswoman from Hong Kong, with Kong-Macau Greater Bay Area. Due to year, Wuxi’s position has risen, while years of experience in investment in the fact that implementation of this Shenyang’s position has declined. There mainland China and Hong Kong. Ms. strategy will exert a great influence on is no major change in ranking among Wang is also actively involved in social the economy, environment, culture and the best and worst cities, though there services, holding public office both in social life in the area, a special interview have been slight variations in the middle mainland China and Hong Kong. Ms. concerning the greater bay area was of the rankings. More minute changes Wang’s contribution in this report arranged, despite lack of such a are observable with the variables in the considers the influence of national and dimension in this year’s report. dimension and further observations are regional urban development strategies presented in the analysis of each Dr. Zhou Ping, from Macau, launched on enterprises from the perspective of dimension. and led a forward-looking and business operation. pragmatic social survey called “Survey Due to the limited space, we are unable Ms. Liu Hongxia from New York of 100 Villages by 100 Doctors”. Dr. to give a detailed analysis on all aspects University Shanghai(NYU Shanghai), Zhou’s contribution to this report of every city, but the report is rich with looks at the topic of education. With her considers regional cooperation and data. Interested readers may conduct world-class educational experience and development from the perspective of the more in-depth analysis based on the 10 a global view, Ms. Liu provides a vivid Belt and Road Initiative and Trade and dimensions and 57 variables perspective of how to build up urban Economic Platform between China and summarised in the report, to focus on intellectual capital. Portuguese-speaking countries. the natural resources, development strategy, industrial layout, historical Dr. Wang Jianye previously held a Each of the interviewees has generously tradition and the success and failure of senior position at the IMF, and served as contributed their knowledge and management practice of specific cities, the Chief Economist at the Export- experience to this report, adding with a view to exploring the Import Bank of China. Today, Dr. Wang nuanced perspective to inform readers’ opportunities that fit with the is an influential figure in business and current understanding of urban development focus of cities. economic academia in China and the development in China. US. His contribution is set against the In-depth interviews backdrop of reform and further opening-up of China’s financial sector In addition to the compilation and this year. analysis of quantitative data, each year, a selection of entrepreneurs, scholars Mr. Bai Jiangong is an entrepreneur and social elites are invited to from mainland China. Having seen ups participate in an interview to share their and downs along Shenzhen’s views and insights. Each interview is development, Mr. Bai has been engaged focused on a topic related to urban in pursuing product and management development, not limited to the innovation. In his capacity with

Chinese Cities of Opportunity 2018 4 Comparison and analysis of Beijing, Shanghai, Guangzhou and Shenzhen

Intellectual capital Technical maturity Major regional Health, safety Transportation and Sustainable Culture and quality Economic clout Cost Ease of doing Score and innovation cities and public urban planning development and of life business security natural environment 1 Beijing 19 17 16 17 24 6 9 21 14 19 162 2 Shanghai 13 12 21 12 18 11 10 19 16 24 156 3 Shenzhen 15 13 11 14 24 19 11 9 16 20 152 4 Guangzhou 13 8 18 13 22 14 10 11 14 14 137 Note: the design of variables and data collection angles for Beijing, Shanghai, Guangzhou and Shenzhen are identical with those of the remaining 26 cities. Due to limited space, only the Dimension Sheet is listed here.

Beijing, Shanghai, Guangzhou and Shenzhen, known as “Bei, Shang, Guang, Shen” for short, are normally classified as first-tier cities. In light of their capacities as agglomerations with economic clout, large population and influence on the global market, the four are all readily identified as cities at an international level. Globally, a megacity is typically a symbol of the country it’s located in, and this is especially true for a great power. In China at this current stage, Beijing, Shanghai, Guangzhou and Shenzhen can each be considered windows into China, and representative of the national profile to a fair extent. According to our data, among the four cities, Beijing and Shanghai rank first and second, followed closely by Shenzhen and then Guangzhou. When it comes to the scores of the dimensions, Beijing heads the list in five dimensions; “intellectual capital and innovation”, “technical maturity”, “health, safety and public security”, “transportation and urban planning” and “economic clout”. Shanghai holds the second place with high scores in “major regional cities” and “ease of doing business”. Shenzhen ranks third and stands side by side with Beijing with regard to “transportation and urban planning”, while topping “sustainable development and natural environment” and “ease of doing business”. Guangzhou exceeds Shenzhen in the dimensions of “major

5 PwC Shenzhen Photo by Susanna Zhang (PwC) Intellectual capital Technical maturity Major regional Health, safety Transportation and Sustainable Culture and quality Economic clout Cost Ease of doing Score and innovation cities and public urban planning development and of life business security natural environment 1 Beijing 19 17 16 17 24 6 9 21 14 19 162 2 Shanghai 13 12 21 12 18 11 10 19 16 24 156 3 Shenzhen 15 13 11 14 24 19 11 9 16 20 152 4 Guangzhou 13 8 18 13 22 14 10 11 14 14 137

regional cities” and “economic clout”, inherent urban characteristics. Beijing implications for the economic growth but occupies the fourth place due to a functions as the political, cultural, and social advancement of China. lower overall score, with comparatively international exchange and scientific Regarding the potential of these shifts, low-ranks in other dimensions. innovation centre, Shanghai serves as we can consider the Xiong’an New Area, China’s largest business and financial Upon PwC’s observation of 30 global in Hebei. This new initiative led by the hub, while Guangzhou established itself cities made in 2016, Beijing came 19th Central Committee of the Communist as a pioneer of reform and opening up in in the overall ranking, though placed Party of China, has the potential to exert China. These three cities have a long 3rd after London and Paris in the far-reaching significance. The seemingly and established history. Shenzhen, a dimension of “gateway city” and also plain and simple words “affairs of 40-year-old city, is a more modern secured the 3rd spot, trailing London national significance” can spark endless construct, yet has quickly managed to and New York, in the “economic clout” imagination of the possibilities for rise to a level on par with the other dimension. Shanghai came 21st in the people in the flat farmlands on the three, despite not sharing a legacy overall ranking, taking the 7th place in North China Plain, particularly if they stretching over millennia. Nevertheless, the two aforementioned dimensions. compare Shenzhen today, with what it Shenzhen has become an illuminating Factors contributing to Beijing and looked like as a small fishing village 40 window into China for the world. This is Shanghai placing lower on the overall years ago. an indication of the scope of China’s global list can be in large part attributed achievements since embarking on The development strategy of the three to their poor performance in the reform and opening up, as well as major regions applies a focus on growth international comparison of the costs evidence of the advantages brought that is specific to each of the cities. dimension, with the two cities taking about by a socialist market economy Hence, the 19th CPC National Congress the lowest, and second lowest positions with Chinese characteristics. report specifies that: “we will create respectively. networks of cities and towns based on An accurate study of China’s top four Based on observations from prior city clusters, enabling the coordinated cities requires a view transcending the reports, Guangzhou has long been development of cities of different sizes traditional limits of these cities. Beijing ranked comparably with Shenzhen. and small towns”, reflecting a new lies at the core of the Beijing-Tianjin- Shenzhen topped the list of domestic situation in development of city clusters Hebei area, Shanghai takes the lead in cities in 2014 and 2015, while with urban and rural integration. the Yangtze River Economic Belt, while Guangzhou came in first in 2016 and both Guangzhou and Shenzhen will be 2017. However, both were given the essential components of the Guangdong- lowest ranking in the costs dimension. Hong Kong-Macau Greater Bay Area. Consequently, we can observe soaring Following roll out by the State Council, costs have become a common feature in the construction of these three major city China’s megacities. clusters has been upgraded to a national We can also note that each of these four development strategy. As a result, these cities feature their own distinct and developments carry strategic

Chinese Cities of Opportunity 2018 6 People in Hong Kong haven’t always counted among those paying the most Studying the attention to the Party Congresses, however, I personally, was deeply impressed by the report to the 19th CPC spirit of the 19th National Congress. Having participated in several learning programs organised CPC National by the Liaison Office of the Central People’s Government in the Hong Kong Congress and S.A.R, I now have a clear understanding of the significance the Congress has on the future development of mainland integrating urban China and Hong Kong. Still, many in Hong Kong may not yet appreciate the development degree to which they are influenced by the Party Congress. Some corporate strategy into executives may show slight interest, but also believe business development is separated from the political context. business However, it is my observation that the two are closely intertwined. When operation looking at investing in the United States, prudent investors will thoroughly explore the political and policy environment there before acting. Similarly, we must keep abreast of the fundamental national policies in mainland China when investing and operating in the country, lest we make unnecessary detours. The report to the 19th CPC National Congress includes specific contents Connie Wong Wai-ching while covering an extensive range. It Member of the National Committee of the CPPCC makes clear our direction for Managing Director of Wong Sun Hing Limited development in the coming five years, Managing Director of Wanling Industrial Co., Ltd. and over the next decade. A clear development objective is proposed: China will achieve modernised development by 2035 and grow into a strong power by 2050. The development focus has been shifted from speed to quality. In terms of assessment for officials, rather than using measures of

7 PwC GDP growth alone, environmental We entrepreneurs must harbour a development of the city, however, I protection effect and energy long-term vision while being sensible to predicted that non-city functions would consumption per unit of output are also changes in the environment. When eventually be transferred. As a result, in taken into consideration. taking charge of the preparation for the recent years we have been improving One Link Plaza integrated project, I was the functions for further transformation There are precedents to learn from. told that costs of fire-fighting equipment and upgrading. By doing so, we have Some years ago, leaders of could be saved by exploiting loopholes been able to keep up with the changes in Guangdong-a provincial pioneer for of laws and following an older fire- the environment at Yuexiu District, reform and opening up-put forward the fighting plan. But, I believed that the plan which is now planned to become a policy known as “emptying the cage for would become stricter as the urban finance and innovation centre. the new birds”. This policy approach environment changed. Therefore, I asked contributed to industrial upgrading and In November last year, I also held a our engineering team to install technological innovations, leading to sharing session on the principles of the equipment in accordance with the latest progress in the development of the 19th CPC National Congress with our high standards. Now, some years later, high-tech park of Shenzhen and group’s management members. the fire-fighting equipment is due for a transformation of Dongguan. This case Hopefully, they can move beyond their new round of approvals to meet serves as a reminder that higher quality older concepts and put in place new requirements for upgrading and and output can lead to the level of requirements as well as objectives that transformation of a commercial building. prosperity desired across China. align with this new era. For us, the As a result of my initial far-sighted “green hills and clear waters” specified Through the report to the 19th CPC decision, there has been no need to add at the 19th CPC National Congress National Congress, President Xi brought more time and money into this. During requires us to enhance our forward 14 basic strategies for the new my time working on business operations, environmental standards. We must head era, the last of which is to officials from administrative for this new objective. comprehensively strengthen party departments have sometimes reminded discipline. This will, among other me that our issues might be solved by I have been asked what impressed me things, lay the foundation for the seeking more personal connections. Yet, most about the report. For me, it is the development of a market-based from my perspective, this cannot serve continuous implementation of stricter economy. In the fledgling years of as our sole focus. We must exercise party discipline since the 18th CPC reform and opening-up, corporate law-based and compliant operations, National Congress! Given the vast investment was sometimes facilitated by while meeting the requirements of urban territory of our nation, loose governance personal connections alone instead of a development. For the existing problems, here and there is doomed to fail. This is contractual spirit; however, this is no we do our utmost best to address them. also true for us. We are called on to longer the case. The country has grown Only by doing so can we stabilise and manage our enterprises strictly, and to into a nation ruled by law; the develop our enterprises for the long haul. value new concepts and objectives so government and society cherish the that we can keep up in this new era. For those of us in business, our contractual spirit, and enterprises can operation is dependent on urban implement reasonable contents of development and it’s crucial for contracts without seeking personal entrepreneurs to figure out the connections here and there. Such a positioning of the cities where our sound situation benefits from businesses are based. As an example, a strengthened party governance. wholesale market that we operated in Personally, I’m glad to see that our Yuexiu District has been a local leading country has demonstrated itself capable enterprise for many years. With the of fully exercising law-based governance.

Suzhou Photo by Ryan Yang (PwC)

Chinese Cities of Opportunity 2018 8 Comparison and analysis of ranking

Intellectual capital Technical maturity Major regional Health, safety Transportation and Sustainable Culture and quality Economic clout Cost Ease of doing Score and innovation cities and public urban planning development and of life business security natural environment 1 Hangzhou 134 117 116 93 121 96 72 138 25 131 1043 2 Wuhan 121 117 110 81 111 80 73 114 77 124 1008 3 Nanjing 135 113 116 63 133 71 76 96 50 140 993 4 Chengdu 127 104 131 93 98 80 53 115 72 90 963 5 Xiamen 100 68 115 58 113 94 76 108 68 126 926 6 Xi'an 99 100 106 91 110 50 51 96 84 90 877 7 Tianjin 101 95 99 59 107 66 58 116 66 99 866 8 Changsha 104 69 91 79 97 96 76 99 56 97 864 9 Suzhou 101 110 74 49 82 74 63 74 83 142 852 10 Zhengzhou 75 58 78 79 108 80 34 77 94 114 797 11 Zhuhai 84 47 43 80 147 85 87 74 30 117 794 12 Qingdao 86 87 95 75 88 69 50 82 56 93 781 13 Jinan 69 70 88 78 85 76 33 90 66 93 748 14 Kunming 71 46 98 66 108 70 31 64 121 71 746 15 Chongqing 60 81 142 60 51 62 28 99 74 81 738 16 Ningbo 79 64 72 48 59 70 70 99 66 110 737 17 Wuxi 74 69 44 42 88 87 58 59 79 127 727 18 Fuzhou 54 65 79 47 82 79 75 76 63 96 716 18 Guiyang 74 18 75 85 101 69 67 56 99 72 716 20 Dalian 62 59 73 63 107 34 59 61 107 90 715 21 Taiyuan 58 29 23 87 84 48 58 58 138 73 656 22 Shenyang 68 63 65 57 77 37 46 44 121 66 644 23 Urumqi 58 13 50 68 109 47 32 55 108 101 641 24 Shijiazhuang 55 37 38 71 57 56 36 56 125 71 602 25 Harbin 33 50 54 48 58 44 25 60 116 49 537 26 Lanzhou 31 22 38 52 89 37 37 50 81 61 498

9 PwC Intellectual capital Technical maturity Major regional Health, safety Transportation and Sustainable Culture and quality Economic clout Cost Ease of doing Score and innovation cities and public urban planning development and of life business security natural environment 1 Hangzhou 134 117 116 93 121 96 72 138 25 131 1043 2 Wuhan 121 117 110 81 111 80 73 114 77 124 1008 3 Nanjing 135 113 116 63 133 71 76 96 50 140 993 4 Chengdu 127 104 131 93 98 80 53 115 72 90 963 5 Xiamen 100 68 115 58 113 94 76 108 68 126 926 6 Xi'an 99 100 106 91 110 50 51 96 84 90 877 7 Tianjin 101 95 99 59 107 66 58 116 66 99 866 8 Changsha 104 69 91 79 97 96 76 99 56 97 864 9 Suzhou 101 110 74 49 82 74 63 74 83 142 852 10 Zhengzhou 75 58 78 79 108 80 34 77 94 114 797 11 Zhuhai 84 47 43 80 147 85 87 74 30 117 794 12 Qingdao 86 87 95 75 88 69 50 82 56 93 781 13 Jinan 69 70 88 78 85 76 33 90 66 93 748 14 Kunming 71 46 98 66 108 70 31 64 121 71 746 15 Chongqing 60 81 142 60 51 62 28 99 74 81 738 16 Ningbo 79 64 72 48 59 70 70 99 66 110 737 17 Wuxi 74 69 44 42 88 87 58 59 79 127 727 18 Fuzhou 54 65 79 47 82 79 75 76 63 96 716 18 Guiyang 74 18 75 85 101 69 67 56 99 72 716 20 Dalian 62 59 73 63 107 34 59 61 107 90 715 21 Taiyuan 58 29 23 87 84 48 58 58 138 73 656 22 Shenyang 68 63 65 57 77 37 46 44 121 66 644 23 Urumqi 58 13 50 68 109 47 32 55 108 101 641 24 Shijiazhuang 55 37 38 71 57 56 36 56 125 71 602 25 Harbin 33 50 54 48 58 44 25 60 116 49 537 26 Lanzhou 31 22 38 52 89 37 37 50 81 61 498

Chinese Cities of Opportunity 2018 10 I. Intellectual capital and innovation

The “Intellectual capital and education, albeit from different angles. innovation” dimension includes six The turnover of full-time teachers places variables. These are “turnover rate of particular emphasis on the changes to a full-time teachers”, “scale of secondary floating population. Emerging coastal vocational education”, “proportion of cities invariably rank in the top positions spending on science and technology”, for this variable. The scale of secondary “level of research and development”, vocational education variable observes “entrepreneurial environment” and the supply of skilled workers in a city. “innovation application”. Given the Graduates from technical secondary limited data sources, there are fewer schools often work in the same city, and variables in this dimension than in some technical secondary schools act as previous years. Therefore, the scores educational establishments for Together with the “level of research and and city ranking for the dimension are enterprises stationed in the city, development”, the two final variables of not directly comparable with the showing a strong relevance with the real the dimension relate to the respective scores from the preceding economy. So compared with the achievements of graduates and post- years. Based on the overall distribution observation of the size of graduates to some extent. They illustrate of the city ranking, however, no major undergraduates, this variable is more the state of scientific and technological changes to the bigger picture are conducive to demonstrating the long- innovation, and also reflect important observed. term impact of intellectual capital. factors for intellectual capital. Overall, Notably, Wuhan, Taiyuan, Guiyang, Nanjing, Hangzhou, Chengdu and Data shows that the top eight cities are Nanjing and Zhengzhou are top ranking Wuhan secured the top four positions in Nanjing, Hangzhou, Chengdu, Wuhan, cities for this variable, most of which are this dimension, each registering in the Changsha, Tianjin, Suzhou and Xiamen. industrial powerhouses. top positions of the six variables. The bottom eight cities are Dalian, Chongqing, Taiyuan, Urumqi, The top scorers for “proportion of As China emphasises a national strategy Shijiazhuang, Fuzhou, Harbin and spending on science and technology” of revitalising the country through Lanzhou. While the 10 cities in the include Zhuhai, Suzhou, Wuhan, science and technology, all cities have middle of the rankings are Xi’an, Hangzhou and Nanjing, showing the scientific advancement and application Qingdao, Zhuhai, Ningbo, Zhengzhou, demand in these cities for technology high up on their agendas. This onus is Guiyang, Wuxi, Kunming, Jinan and spending, as well as their relatively readily seen as one glances over the Shenyang. stable fiscal strength, underpinning mayor’s report on the government work technology spending. for each city. The different cities have Xiamen, Suzhou and Zhuhai secured the diverse industrial foundations and top three places in the variable of “Level of research and development” is a scientific resources, as well as distinctive “turnover rate of full-time teachers”, composite variable constituted of three development directions and speeds. We indicating the rigid demand for primary factors. Due to the limited data sources, can only provide a basic description of and secondary school teachers arising we do not have access to recent data, but the general conditions. Closer and from population growth. This trend is a comparison is still applicable. The deeper observations on each city would also observed in the “rate of change in highest ranked cities are Nanjing, be required for a more nuanced floating population” variable. Wuhan, Xi’an, Hangzhou and Tianjin. understanding of each city’s intellectual The “scale of secondary vocational The last two variables reflect capital cultivation and scientific education” and “turnover rate of entrepreneurship and innovation, with innovation. full-time teachers” variables are both the top three cities for these being aimed at observing adolescent Hangzhou, Chengdu and Nanjing.

11 PwC Turnover rate of Scale of Proportion of Level of research ntrepreneurial nnovation Total fulltime teachers secondary spending on and development environment application vocational science and education technology 1 Nanjing 16 23 22 26 24 24 135 2 Hangzhou 21 15 23 23 26 26 134 3 Chengdu 22 20 16 19 25 25 127 4 uhan 2 26 24 25 23 21 121 5 Changsha 23 6 13 21 19 22 104 6 Tianjin 13 8 19 22 21 18 101 6 Suzhou 25 5 25 4 22 20 101 8 iamen 26 9 15 12 20 18 100 9 ian 8 18 17 24 17 15 99 10 ingdao 14 16 8 21 13 14 86 11 Zhuhai 24 3 26 3 10 18 84 12 Ningbo 17 1 21 2 15 23 79 13 Zhengzhou 11 22 7 9 14 12 75 14 Guiyang 20 24 18 7 3 2 74 14 ui 10 11 20 6 8 19 74 16 Kunming 18 21 10 10 6 6 71 17 Jinan 15 19 5 15 12 3 69 18 Shenyang 4 14 14 16 11 9 68 19 Dalian 12 12 12 14 7 5 62 20 Chongqing 6 4 3 17 18 12 60 21 Taiyuan 7 25 9 11 5 1 58 21 rumqi 19 17 11 2 1 8 58 23 Shijiazhuang 9 13 6 8 9 10 55 24 Fuzhou 5 10 4 5 16 14 54 25 Harbin 1 2 1 18 4 7 33 26 Lanzhou 3 7 2 13 2 4 31

Chinese Cities of Opportunity 2018 12 I am pleased to see that intellectual capital and innovation ranks at the top Complementarity of the quantitative indicators of Chinese Cities of Opportunity. The core of intellectual capital and innovation is the between a research cultivation of human talent, and the core of cultivating human talent is university and education. The quantitative indicators used here for the evaluation of an intellectual- investment in intellectual capital for Chinese Cities of Opportunity include: spending on science and technology, innovative city level of research and development, entrepreneurial environment, and innovation application. To a large extent, these variables correlate positively, I believe, to the capacity- building of university in a city–in particular, research university. The development strategies of China’s many large cities highlight strengthening university capacity, Liu Hongxia especially in relation to top research universities. Strengthening university Associate Vice Chancellor, capacity does not however, mean NYU Shanghai building more universities. Rather, universities must embrace such a development goal from quantity to quality in order to cultivate more innovative talent for society. President Xi Jinping, at the 19th National Congress of the Communist Party of China declared: “We will move faster to build Chinese universities into world- class universities and develop world- class disciplines as we work to bring out the full potential of higher education.” Building world-class universities and world-class disciplines is a new measure by which cities and municipalities can pursue for the promotion of intelligence and innovation. There are numerous examples at home and abroad which

13 PwC demonstrate that a research university their respective host cities, a new other countries including the US, UK, and an intellectual-innovative city generation of “innovative” talent. Pakistan and the Philippines. All complement each other well and students engaged equally in the The cultivation of “innovative” talent promote mutual development. discussions and debates with John in and building of world-class universities and out of classroom. At the end of As the inner-quality demands on does not mean chasing immediate or semester when asked about their biggest Chinese universities increase, Chinese- fancy gains on the surface. Initially at gains from this course, the students foreign joint-venture institutions have NYU Shanghai, many parents want their answered that it was courage and sprung up as a new mode of higher children to study business and finance, capacity for independent analysis based learning. Examples include Xi’an so that they are on a fast track to become on facts, it was confidence for expressing Jiaotong-Liverpool University, senior executives or even presidents of their own thoughts, and it was University of Nottingham Ningbo China, enterprises, banks or investment temperament when seeking common New York University Shanghai (NYU companies. Our leadership and faculty ground amid different perspectives Shanghai), Duke Kunshan University, encourage our students and their across cultures. Wenzhou-Kean University, Beijing parents to take note of the fact that few Normal University-Hong Kong Baptist Chairs/CEOs of the world’s top 500 In conclusion, while some indicators University United International College, companies graduated with used here to evaluate investment in a The Chinese University of Hong Kong undergraduate majors in business and city’s intellectual capital and innovation Shenzhen, Guangdong Technion Israel finance. Many instead studied subjects environment can be quantified, others Institute of Technology, and Shenzhen such as history, literature, philosophy, cannot. Even if some indicators cannot MSU-BIT University. Notably, these mathematics or art. Our university be quantified, it doesn’t necessarily universities, as independent legal stresses the importance of a liberal arts mean that they are unimportant. In the entities, are located in Shanghai or other education. Students can choose their long-term, support for and acceleration coastal cities-which lead their peers in majors based on their own interests of the building of world-class indicators of intellectual investment and after a two-year general education. They universities and world-class disciplines innovation in Chinese Cities of can also study for one to two semesters will come to serve as a viable bridge for Opportunity. These cities all enjoy a high in another campus within New York host cities to enhance investment in degree of internationality and their local University’s global network, which intellectual capital and environment for governments, enterprises, communities spans 13 other top cities around the innovation. Several key factors, such as and citizens are relatively open and world. Consequently, students can liberal arts education with international inclusive for these “mixed-blood” pursue their own dreams and careers, perspectives, heuristic teaching method, institutions. Such factors ultimately lead maintain their spontaneity and encouragement of critical thinking, and to, in varying degrees, access to enthusiasm, and broaden their an academic atmosphere premised on financial and material resources and at international perspectives. tolerant and inclusive communication, the same time recognition in stature and can determine whether Chinese Over a year ago, I assisted John Sexton, accommodation in policy. As a result, universities will succeed in inner- the former President of New York these institutions are well placed to capacity building and advance into the University, to teach an undergraduate apply internationally advanced world’s top rank, while delivering elective course at NYU Shanghai. John pedagogy, curriculum, and faculty and innovative talent in the future applied the Socratic heuristic teaching student management. In serving as an generations. method throughout the entire course, “experimental field” for China’s reform encouraging students to seek out facts, in the higher learning and cultivation of raise questions, and conduct debates. world-class universities, these joint- The class catered to 18 students, half of venture universities are grooming, in them hailed from China, and half from

Chengdu Tianfu Software Park

Chinese Cities of Opportunity 2018 14 II. Technical maturity

nternet plus Digital economy Software and Technology market Number of Total multimedia design size hightech incubators

1 Hangzhou 2 26 2 1 2 11 1 uhan 2 2 1 26 2 11 3 Nanjing 18 22 26 2 22 11 4 Suzhou 20 2 21 20 26 110 5 Chengdu 26 16 2 21 1 10 6 ian 1 1 20 2 21 100 7 Tianjin 1 11 1 2 2 8 ingdao 1 1 22 18 1 8 9 Chongqing 2 1 22 18 81 10 Jinan 11 1 2 1 10 0 11 Changsha 21 1 1 6 11 ui 8 12 1 16 20 6 13 iamen 1 2 16 10 68 14 Fuzhou 22 18 12 11 2 6 15 Ningbo 1 20 11 10 10 6 16 Shenyang 12 1 16 1 6 17 Dalian 6 18 1 16 18 Zhengzhou 16 1 1 8 19 Harbin 1 8 1 1 0 20 Zhuhai 21 10 21 Kunming 10 10 1 6 22 Shijiazhuang 10 6 23 Taiyuan 8 1 8 2 24 Lanzhou 1 2 12 22 25 Guiyang 6 1 18 26 rumqi 2 2 1 1

15 PwC Since President Xi proposed the which has led to the city becoming the cultivating innovation. The city is also enhancement of supply-side reform in e-commerce centre for China and indeed, host to Suzhou Nanopolis, the largest November 2015, the innovation-driven the whole world. On the same day of the integrated business community for the approach has been upgraded to a “Double Eleven” shopping spree of 2017, nanometer technology industry in the state-level strategy. Subsequently, the TMALL recorded CNY168.2 billion in world. Having grown incrementally over 19th CPC National Congress made clear turnover, setting a new global record for time, the site is now home to more than that “innovation” is the primary driving online sales. Alibaba’s enormous 260 signatory enterprises and force behind development, and that economic volume has galvanised the institutions related to nanometer China encourages the vigorous development of the digital economy in technology, and continues to attract new development of emerging industries that Hangzhou and across China. enterprises. In 2017, Suzhou saw the utilise resources reasonably and have addition of seven new state-level high- The “technology market size” variable high added value. The “technical tech incubators. As a result of these includes two sub-variables, namely, maturity” dimension is designed to service providers that cultivate and foster “technology output turnover” and weigh up the development status of the small and medium-sized high-tech “technology input turnover”. Wuhan cutting-edge technology industry in enterprises, Suzhou is well positioned to and Nanjing hold the first two places in each of the cities. It includes five continue to mobilise the development of the variable, both of which are home to variables which are; “Internet plus”, high-tech enterprises in the Yangtze famous universities. As a hub of talent in “digital economy”, “software and River Delta Area. central China, Wuhan now has over 80 multimedia design”, “technology market universities with over one million Taking the “Internet Plus Digital size” and “number of high-tech college students, while Nanjing is an Economy Index” as the basis for incubators”. important scientific research education measurement, the “Internet plus” The last variable for this dimension, base in eastern China, where the pool of variable reflects the degree of “number of high-tech incubators”, has high-quality talent and abundant integration of Internet, cloud been included for the first time this year. educational resources continue to spur computing, big data, the Internet of This new addition takes the number of rapid local industrial development. Things and related technology with state-level high-tech incubators as its Universities in Nanjing have been agriculture, industry, catering, tourism, key measure. High-tech incubators are focused on developing science and transportation, retail e-commerce, the cradle of implementing the strategy technology, and the city now stands finance and other sectors. Chengdu of independent innovation, cultivating above its peers in the software industry, ranks at the top in this variable. The city leading high-end, forward-looking, and surpassed in China only by Beijing and is known as the “fourth city of games” strategic emerging enterprises at an Shenzhen. With regard to the variables, and “city of mobile games” due to the early stage. By adding this variable, we Nanjing is top of “software and local digital game industry’s prosperous aim to extend insight into the multimedia design”. Nanjing also takes development. Relevant statistical data application status of the high-end the second place in the variable of indicates that in 2016, the Chengdu technology industry in China, helping “technology market size” (tied with Hi-tech Industrial Development Zone the observations of the “technical Xi’an and Tianjin), highlighting the attracted more than 300 digital game- maturity” dimension to keep pace with positive urban benefits that correlate related companies. Talent lies at the urban developments. with the presence of well-known core of intellectual resources, universities and research institutions. underpinning the development of The top five cities in this dimension are “Internet plus”. Chengdu ranks first in Hangzhou and Wuhan (tied), Nanjing, As noted, the newly added variable of western China as a hub for talent with Suzhou and Chengdu, each of which “number of high-tech incubators” helps the skills to continue the development of takes first place in the five variables to measure the level of technical “Internet plus”. Progressing with respectively. The “digital economy” maturity demonstrated by high and new “Internet plus” can help to increase the variable uses AliResearch’s technology and emerging industries. economic efficiency, stimulate the “e-commerce development index” to Suzhou scores the highest among the 26 development potential and mobilise rank cities, and Hangzhou tops the list cities in this field. Suzhou is a national robust advancement of the real economy in this regard. Alibaba Group, the hub for the high-tech industry, with in Chengdu. earliest and largest Internet enterprise Suzhou Industrial Park playing a special in China, is headquartered in Hangzhou, role as an experimental zone for

Hangzhou Photo by Melody Chen (PwC)

Chinese Cities of Opportunity 2018 16 III. Major regional cities

According to China’s “13th Five-year Plan”, development of the nation’s new-type urbanisation will see the concept of city clusters replace the former approach of point-to-point city development. Within the scope of enhancing the leading function of central cities, 19 city clusters will be developed. At the centre of each city cluster will be a megacity, which will mobilise and galvanise the development of smaller neighbouring cities, and facilitate regional economic development. Consequently, in this report, the “major regional cities” dimension is used to review the role of each observed city in its region, and its capacity to mobilise overall Tianjin Photo by Faust Ren (PwC) development in that region. This dimension includes six variables, namely, “star-graded hotels”, Star-graded hotels International Inbound and Passenger Freight volume Exhibition/convention Total “international tourists”, “inbound and tourists outbound flights capacity economy development index outbound flights”, “passenger capacity”, 1 22 24 23 24 26 23 142 “freight volume” and “exhibition/ Chongqing convention economy development 2 Chengdu 24 19 25 26 11 26 131 index”. The remit of our observation 3 Hangzhou 26 18 22 19 16 15 116 includes provincial capitals, and cities 3 Nanjing 26 15 21 16 17 21 116 with advanced economies in certain 5 Xiamen 24 25 20 8 13 25 115 regions, as well as gateway cities with 6 Wuhan 16 22 18 22 24 8 110 deep international ties. 7 Xi'an 16 17 24 21 10 18 106 Statistics show that Chongqing, 8 Tianjin 10 26 14 18 25 6 99 Chengdu, Hangzhou and Nanjing (tied), 9 Kunming 18 12 26 10 15 17 98 and Xiamen are the top five cities in this 10 Qingdao 18 16 17 6 14 24 95 dimension. Chongqing ranks among the 11 Changsha 22 7 16 12 18 16 91 top three in the variables of 12 Jinan 19 6 9 15 19 20 88 “international tourists”, “passenger 13 Fuzhou 20 21 8 14 12 4 79 capacity” and “freight volume”, while 14 Zhengzhou 4 8 19 17 8 22 78 Chengdu is top in the variables of 15 Guiyang 9 3 13 25 20 5 75 “passenger capacity” and “exhibition/ 16 Suzhou 1 23 4 23 4 19 74 convention economy development 17 Dalian 7 14 12 11 22 7 73 index”. The results highlight the decisive 18 Ningbo 12 11 4 9 23 13 72 role that both cities play in the city clusters of the central and western 19 Shenyang 3 13 10 20 9 10 65 regions. Hangzhou is placed first in the 20 Harbin 13 5 11 13 1 11 54 variable of “star-graded hotels” thanks 21 Urumqi 6 9 15 2 6 12 50 to its rapid economic development and 22 Wuxi 12 10 1 7 5 9 44 strengthened external communications 23 Zhuhai 14 20 2 4 2 1 43 in recent years. In addition, Nanjing and 24 Lanzhou 8 1 7 5 3 14 38 Xiamen have achieved relatively 24 Shijiazhuang 5 2 5 3 21 2 38 balanced development as hubs with 26 Taiyuan 2 4 6 1 7 3 23

17 PwC Nanjing playing an important role as a major route for land borne trade transport hub facilitating connection major city in eastern China, and Xiamen between China and Europe, with a total with South and Southeast Asia. It is also serving as the central city in the journey duration that has been reduced the largest supplier of fresh-cut flowers III. Major regional cities southeastern coastal area. to just 13 days. in China, and in fact, Asia. While continuing to hold the top spot in Concurrently, Chengdu, the fourth Also of note, Xiamen ranks among the the variable of “freight volume”, largest aviation hub and fifth largest top three in three out of the six variables Chongqing ranks third in the variable of railway hub in China, is evidently of this dimension, including occupying “passenger capacity”. It also takes the accelerating its internationalisation at second place in the variables of strategic position of traffic hub in the pace. The “Chengdu-Europe Plus” “international tourists” and “exhibition/ southwestern region, as the only International Railway from Chengdu to convention economy development megacity in the upper reaches of the Lodz, Poland now sees regular index”. After successfully hosting the Yangtze River with transportation operation. The number of air routes to BRICS Summit in 2017, Xiamen has resources spanning water, land and air. Europe and North America opened by increased development of its exhibition After years of development, Chongqing Chengdu ranks first in the central and economy, while its picturesque port city has completed the expressway network western regions, so its position at the environment and position as the special referred to as “two ring roads and ten top for the variable of “passenger economic zone will continue to facilitate radial highways”, as well as the railway capacity” is also well-deserved. In urban development in the future. network known as “one pivot and eight addition, as an international gateway We believe that driving the development trunk lines”. Additionally, the port has and hub city, Chengdu has overseen of city clusters by improving the major an annual throughput output of 160 rapid development of its exhibition city and subsequently advancing million tons. At the same time, the economy. coordinated development across the “YUXIN’OU” (Chongqing-Xinjiang- Kunming comes out top in the variable region will prove to be a successful new Europe) International Railway has of “inbound and outbound flights”, direction for urbanisation in China. developed a regular all-purpose being a gateway city and regional operation. The railway serves as the

Star-graded hotels International Inbound and Passenger Freight volume Exhibition/convention Total tourists outbound flights capacity economy development index

1 Chongqing 22 24 23 24 26 23 142 2 Chengdu 24 19 25 26 11 26 131 3 Hangzhou 26 18 22 19 16 15 116 3 Nanjing 26 15 21 16 17 21 116 5 Xiamen 24 25 20 8 13 25 115 6 Wuhan 16 22 18 22 24 8 110 7 Xi'an 16 17 24 21 10 18 106 8 Tianjin 10 26 14 18 25 6 99 9 Kunming 18 12 26 10 15 17 98 10 Qingdao 18 16 17 6 14 24 95 11 Changsha 22 7 16 12 18 16 91 12 Jinan 19 6 9 15 19 20 88 13 Fuzhou 20 21 8 14 12 4 79 14 Zhengzhou 4 8 19 17 8 22 78 15 Guiyang 9 3 13 25 20 5 75 16 Suzhou 1 23 4 23 4 19 74 17 Dalian 7 14 12 11 22 7 73 18 Ningbo 12 11 4 9 23 13 72 19 Shenyang 3 13 10 20 9 10 65 20 Harbin 13 5 11 13 1 11 54 21 Urumqi 6 9 15 2 6 12 50 22 Wuxi 12 10 1 7 5 9 44 23 Zhuhai 14 20 2 4 2 1 43 24 Lanzhou 8 1 7 5 3 14 38 24 Shijiazhuang 5 2 5 3 21 2 38 26 Taiyuan 2 4 6 1 7 3 23

Chinese Cities of Opportunity 2018 18 China has recently announced plans to further open up its financial sector. The International significant measures are to remove limits on foreign equity share in banks and asset management companies, mobility of treating domestic and foreign investors equally; to phase out equity share limits productive in securities and insurance firms, allowing foreign ownership up to 51% factors and immediately and to 100% in three years for the securities industry, and in five years for the insurance industry. governance Meanwhile, the government has announced further reduction of import modernisation tariffs on consumer goods, and entry barriers to the domestic tertiary industry. We all know that developing countries have huge unmet investment needs, including in infrastructure. International financing cost has been extremely low since the financial crisis in 2008. Why haven’t we seen capital, talents and other productive factors Wang JianYe swarm to these countries? A recent study by World Bank (WB) staff Professor, Guangzhou Institute of International indicates that emerging markets and Finance and NYU Shanghai developing countries suffered from a Former MD, Silk Road Fund sharp drop in the growth rate of per Chief Economist, China Exim Bank capita investment in the post-crisis period. Non-BRICS commodity exporters experienced a decline from about 7% in 2010 to 0.1% in 2016, while per capita investment recovered in developed countries to near their long-term average by 2014-15. The WB research suggests that the main reasons behind the sluggish investment and growth in most developing countries are internal: worsening business environment, piled-up corporate debts, and heightened policy uncertainties – these explicit and implicit domestic barriers have impeded inflows of capital and other productive factors. The external environment also played a role, mainly

19 PwC through the impact of slowdown by on their relative scarcity and hard Public finance reform is particularly large economies including China, and infrastructure (e.g., roads, availability important in modernising a country’s deteriorating terms-of-trade. of electricity), but also fundamentally economic and social governance, on the clustering of such factors requiring difficult reforms on the With regard to China’s cross-border (positive externality) and “soft revenue and expenditure side, as well capital flows in recent years, three types infrastructure”, i.e. an open, fair, and as on central-local financial relations. of driving forces have become transparent business environment, A good revenue system, in my view, observable: cyclic driver: US Fed’s exit along with strong protection for should not rely heavily on non-tax from quantitative easing (QE), changing property rights including IPR, revenues. The tax regime should expectations on interest rate adequate supply of other “public encourage or not punish business and differentials and exchange rate goods” supported by low and non- innovations, and help reduce income/ movements led domestic entities to discriminatory taxation, sustainable wealth disparities. It needs to be simple, adjust their foreign debt and asset public finances, as well as governance without too many taxes, using relatively positions; structural driver: rising of society abiding by rule-of-law. low rates, and relying mainly on direct domestic costs (of labour, land, taxation, with few exemptions, which in compliance of environmental Our history over the past 40 years has practice often become rent-seeking regulations, etc.). As China’s been a process of continuing efforts to loopholes. The recent tax reform industrialisation reached a plateau, with open up, increasing international package enacted in the US, together large overcapacity, investment returns mobility of capital and other productive with tax reforms by other developed in traditional industries began to factors, to clearly delineate property countries could add pressure on diminish; and governance driver: rights, to enlarge and ultimately to let countries with high tax rates, low tax which affect state-owned enterprises the market play a dominant role in administration capacity, and high (SOEs) through corporate governance, resource allocation, as well as to reform government/broad public sector and non-SOE enterprises through and modernise governance. The CPC financing costs. Such pressure will be taxation, regulatory regimes, property Third Plenary Session of the 18th increasing with population aging, rights including IPR protection, law Congress was committed to modernising therefore, timely revenue reform to enforcement, as well as various other the country’s governance systems. While increase progressivity of the tax system, interferences in the playing field for much has been achieved, we should be and reform of the broad public sector to business. sober on the challenges going forward. reduce costs, increasing the efficiency of Two of the most prominent The cyclic driver is relatively easy to providing “public goods” are critical for challenges come from reform of SOEs understand, although cross-border flows achieving fiscal sustainability and and public finances. of short-term capital could be volatile lasting prosperity. and destabilising; the structural driver As China advances its economic Increasing international mobility of needs be handled through structural transition, SOEs are still dominant or capital, talents and other productive adjustment, industrial upgrading to important in many industries. However, factors put pressure on domestic move up the value-chain, increasing rate of return on investment and on reform. Under certain conditions efficiency and productivity of the assets in SOEs had been trending down where forces of reform overcome the Chinese economy. The governance and far below that of private enterprises. resistance of vested interests, the driver is arguably even more important, SOE reform, therefore, needs to pressure leads to institutional and having a deep and lasting impact on develop market-compatible corporate governance modernisation. The cross-border flows of productive factors. culture and incentives, breakup entry essence of the Belt and Road Initiative is barriers, remove implicit subsidies, Evidence at home and abroad to open up, which will ultimately benefit subject SOEs to competitive suggests that productive factors flow the business community as well as pressures, and significantly improve from poor to good environments, society at large. It will benefit the corporate governance. from low-return to high-return reforming countries and their territories. The rate of return on international partners, resulting in a productive factors depends not only true “win-win” outcome.

Hangzhou Photo by Kim Sheng (PwC)

Chinese Cities of Opportunity 2018 20 IV. Health, safety and public security

The 19th CPC National Congress report cared for an aging community since the Notably, four non-provincial capitals, considers a “healthy population” to be a 1980s. Indeed, the city established an Zhuhai, Suzhou, Wuxi and Xiamen, lie key characteristic of a strong and approach known as “9064”. This sets out at the bottom of specific variables used prosperous nation, and documents that the target for 90% of the city’s elderly in this dimension; while Ningbo- implementation of the Healthy China population to live in independent another non-provincial capital–also initiative will commence in the next home-based care, which relies on rank among the bottom in some period. The “health, safety and public communities to care for the individuals variables. Although the positions of security” dimension of this report is with assistance from social services; 6% some are not the very lowest in the designed to review the medical to receive care at home, benefiting from dimension, the general lagging resources in each city that underpin the governments’ purchasing service; performance of cities that are not residents’ health, urban safety and and 4% to live in retirement institutions provincial capitals in specific variables public security, and in so doing, offer that provide concentrated elderly care indicates that these cities–which are all effective considerations for city services. In addition to benefiting local open coastal cities with rapid economic administrators. There are five variables residents, Hangzhou’s innovative growth–still have work to do in used in this dimension, which are policies for elderly care have provided a improving their capacities in this “medical resources”, “medical facilities”, useful template for other cities to follow. dimension. “elderly care”, “urban traffic safety In recent years, Hangzhou has index” and “loss due to disasters”. These successively released 11 comprehensive variables help to provide an indication policy papers, over 30 supporting of the state of medical services, elderly policies and six local standards to care and comprehensive security of a advance care for the elderly. The city has Medical resources Medical facilities lderly care rban traffic safety Loss due to Total city. They are useful for making also established a leading group for inde disasters observations and comparison between building their elderly care system and a 1 24 23 26 9 11 93 cities, though, additional meticulous steering group for the integrated pilot Hangzhou study would be required for a more reform of the elderly care industry, which 1 Chengdu 18 20 9 20 26 93 in-depth appreciation of safety and is headed by municipal leaders, and aims 3 ian 13 24 17 13 24 91 security in each specific city. to continue advancing the work of 4 Taiyuan 26 23 11 14 13 87 elderly care in a holistic manner. 5 Guiyang 17 18 14 24 12 85 The top ranking cities for this dimension Guiyang is another city that grades well 6 uhan 16 26 6 18 15 81 are Hangzhou and Chengdu (tied), in this dimension, seeing its ranking 7 19 2 25 11 23 80 Xi’an, Taiyuan and Guiyang, which are Zhuhai rising in step with its economic then followed by Wuhan, Zhuhai, 8 Changsha 21 10 7 25 16 79 development over the years. Guiyang has Changsha and Zhengzhou (tied), and 8 Zhengzhou 7 8 13 26 25 79 also maintained top position for four Jinan. When it comes to the ranking of 10 Jinan 25 13 16 3 21 78 consecutive years among Chinese this dimension, there is no clear 11 ingdao 11 5 20 21 18 75 provincial capitals when it comes to geographical disparity in city 12 Shijiazhuang 10 14 2 23 22 71 economic growth rate. Over this period, distribution, but we can see that the top 13 23 13 12 6 14 68 Guiyang has worked to develop emerging rumqi ranked cities are predominantly made science and technology, and positioned 14 Kunming 22 5 3 19 17 66 up of provincial capitals. One reason for itself as a hub for big data. The city has 15 Nanjing 12 21 15 8 7 63 this relates to Chinese medical resources been approved to build the state-level 15 Dalian 14 13 10 16 10 63 being primarily concentrated in nesting zone for big data industrial 17 Chongqing 1 20 8 22 9 60 provincial capitals, where management development, together with the pilot site 18 Tianjin 3 26 18 10 2 59 resources are relatively abundant. for technology innovation of the big data 19 iamen 8 8 24 17 1 58 Hangzhou, the city with the best industry. It is also the core of the national 20 Shenyang 15 15 19 5 3 57 performance in this dimension, big data (Guizhou) comprehensive pilot 21 Lanzhou 20 10 1 2 19 52 remained top in the variable of “elderly site. Ongoing economic development can 22 Suzhou 5 2 22 12 8 49 care”, benefiting from a track record of continue to spur further improvements at 23 Harbin 2 18 4 4 20 48 attaching importance to elderly care over the urban administration level, provide 23 Ningbo 9 5 23 7 4 48 the years, and consequently, has richer life convenience, while helping to 25 4 18 5 15 5 accumulated substantial experience and improve health and public security for Fuzhou 47 development in this area. Hangzhou has the residents. 26 ui 6 8 21 1 6 42

21 PwC Medical resources Medical facilities lderly care rban traffic safety Loss due to Total inde disasters

1 Hangzhou 24 23 26 9 11 93 1 Chengdu 18 20 9 20 26 93 3 ian 13 24 17 13 24 91 4 Taiyuan 26 23 11 14 13 87 5 Guiyang 17 18 14 24 12 85 6 uhan 16 26 6 18 15 81 7 Zhuhai 19 2 25 11 23 80 8 Changsha 21 10 7 25 16 79 8 Zhengzhou 7 8 13 26 25 79 10 Jinan 25 13 16 3 21 78 11 ingdao 11 5 20 21 18 75 12 Shijiazhuang 10 14 2 23 22 71 13 rumqi 23 13 12 6 14 68 14 Kunming 22 5 3 19 17 66 15 Nanjing 12 21 15 8 7 63 15 Dalian 14 13 10 16 10 63 17 Chongqing 1 20 8 22 9 60 18 Tianjin 3 26 18 10 2 59 19 iamen 8 8 24 17 1 58 20 Shenyang 15 15 19 5 3 57 21 Lanzhou 20 10 1 2 19 52 22 Suzhou 5 2 22 12 8 49 23 Harbin 2 18 4 4 20 48 23 Ningbo 9 5 23 7 4 48 25 Fuzhou 4 18 5 15 5 47 26 ui 6 8 21 1 6 42

Chinese Cities of Opportunity 2018 22 V. Transportation and urban planning

This dimension is assessed using seven In this dimension, Zhuhai and Nanjing variables. These are, “road area per rank among the top cities in most capita”, “public transit system”, “rail variables. Consequently, both cities transit coverage”, “urban expansion come out at the top of the rankings for rate”, “state of floating urban the second consecutive year. The two population”, “green area” and “available cities are followed closely by Hangzhou, housing for residents”. The first three Xiamen, Wuhan and Xi’an. Despite the variables reflect urban traffic status, and smaller urban area, Zhuhai ranks the the subsequent four relate to the urban first in the three variables of “road area planning conditions. On this basis, per capita”, “urban expansion rate” and analysis has been carried out on the “available housing for residents”, which state of transportation and urban use per capita figures and land area for planning in every city. Included in these measurement. One factor for these variables is the “state of floating urban results relates to the city’s population population”, which observes the being relatively less permanent than changes to a floating population in the that of many of the comparable cities. cities over five years.

Road area per Public transit Rail transit rban epansion State of floating urban Green area vailable housing Total capita system coverage rate population for residents

1 Zhuhai 26 2 2 26 18 2 26 1 2 Nanjing 2 20 26 6 26 2 1 3 Hangzhou 10 2 1 1 1 18 2 121 4 iamen 1 2 1 22 2 1 11 5 uhan 1 18 2 6 20 22 111 6 ian 1 22 1 11 20 20 110 7 rumqi 18 26 6 11 2 2 2 10 8 Kunming 1 18 1 12 10 1 18 108 8 Zhengzhou 16 1 2 1 2 108 10 Tianjin 16 12 20 16 26 6 11 10 10 Dalian 12 20 2 22 1 22 10 12 Guiyang 1 26 1 18 1 101 13 Chengdu 8 21 1 2 10 8 8 14 Changsha 1 1 26 21 2 15 Lanzhou 2 21 2 2 8 6 6 8 16 ui 21 1 10 21 1 88 16 ingdao 1 1 10 1 1 12 12 88 18 Jinan 2 12 1 16 8 19 Taiyuan 22 8 16 1 8 20 Suzhou 20 12 1 21 82 20 Fuzhou 1 6 8 18 16 1 1 82 22 Shenyang 11 10 22 20 23 Ningbo 2 18 1 10 24 Harbin 8 16 21 2 1 1 8 25 Shijiazhuang 1 1 2 1 11 26 Chongqing 6 2 11 12 1

23 PwC In recent years, rail transit has played a population, Nanjing still maintains first transportation system. At this moment, decisive role in tackling urban position for the per capita green area, Wuhan lies at the centre of what is congestion and improving mobility reflecting the government’s efforts to referred to as the “1-2-3-4-hour” efficiency for residents. As a new-type, promote green space in the city and transportation circle, while the convenient and environmental-friendly prioritise municipal planning. integrated traffic system of “railway, mode of travel, rail transit is highway, water and air transport” The “public transit system” variable is increasingly valued by local achieves continuous improvements. As calculated using two parameters, which governments. Virtually all cities mention with Wuhan, Xi’an, one of the eight look at the passenger turnover rate of the improvement and optimisation of leading railway hubs in China, is public transit, and the number of buses rail transit construction in the “13th developing itself into an important city available for every 10,000 people. As Five-year Plan”, which helps explain why that acts as an “international transport Urumqi has a lower permanent we have selected this variable for four corridor” and “international aviation population and is also an important years in a row. Looking at the ranking, hub”. Further, the city’s “star-shaped” integrated traffic hub in the region, it Nanjing has come out top for three high-speed railway is expected to be ranks first in this variable, consecutive years, with outstanding completed and open to traffic in 2020. demonstrating that the per capita public performance in the variable of “rail Beyond that, Xi’an is also speeding up transit resources in Urumqi are transit coverage”, an outcome that can construction of its urban rail transit. relatively sufficient. be primarily attributed to the city’s Since 2017, the total mileage of rail development of rail transit over many It’s also worth noting the improved transit under construction has reached years. Currently, Nanjing holds fourth ranking of Wuhan and Xi’an from the 203.2 kilometres, and observers can place in China when it comes to the previous year. These rise in rankings witness an unprecedented nine lines mileage of subways. In the next five benefitted from the rapid development being built simultaneously. years, 17 new rail transit lines will be of urban transport. As the axis of China’s built in Nanjing and the surrounding high-speed railway network, Wuhan has metropolitan area. It is also noteworthy seen development increase due to that, despite the status of the permanent advantages of a rapid and accessible

Road area per Public transit Rail transit rban epansion State of floating urban Green area vailable housing Total capita system coverage rate population for residents

1 Zhuhai 26 2 2 26 18 2 26 1 2 Nanjing 2 20 26 6 26 2 1 3 Hangzhou 10 2 1 1 1 18 2 121 4 iamen 1 2 1 22 2 1 11 5 uhan 1 18 2 6 20 22 111 6 ian 1 22 1 11 20 20 110 7 rumqi 18 26 6 11 2 2 2 10 8 Kunming 1 18 1 12 10 1 18 108 8 Zhengzhou 16 1 2 1 2 108 10 Tianjin 16 12 20 16 26 6 11 10 10 Dalian 12 20 2 22 1 22 10 12 Guiyang 1 26 1 18 1 101 13 Chengdu 8 21 1 2 10 8 8 14 Changsha 1 1 26 21 2 15 Lanzhou 2 21 2 2 8 6 6 8 16 ui 21 1 10 21 1 88 16 ingdao 1 1 10 1 1 12 12 88 18 Jinan 2 12 1 16 8 19 Taiyuan 22 8 16 1 8 20 Suzhou 20 12 1 21 82 20 Fuzhou 1 6 8 18 16 1 1 82 22 Shenyang 11 10 22 20 23 Ningbo 2 18 1 10 24 Harbin 8 16 21 2 1 1 8 25 Shijiazhuang 1 1 2 1 11 26 Chongqing 6 2 11 12 1

Chinese Cities of Opportunity 2018 24 VI. Sustainable development and natural environment

The dimension of “sustainable exploring a direction of development customs of the region’s government, development and natural environment” suitable for Changsha’s objective society and people. Although our mainly evaluates the impact of situation, and subsequently becoming assessment tools cannot account for resources, environment and labour among the first batch of pilot sites for these deep-seated factors, the analysis supply on the future development of the country’s resource conservation and of results from the resource, cities. It includes five variables, namely environment-friendly society concept. environment and labour supply data are “residential water resources per capita”; This demonstrates the advantages of quite close to actual on-the-ground “centralised sewage treatment rate and “sustainable development and natural realities. It is thus necessary for household waste disposal rate”; “labour environment”, which has made stakeholders such as city managers, supply”; “rate of change in floating Changsha the centre of development for entrepreneurs, experts and scholars to population”; and “carbon emissions”. Of the Changsha-Zhuzhou-Xiangtan carry out in-depth studies on how to these, the “rate of change in floating urban cluster. Currently, Changsha is lead northeast China’s old industrial population” uses the ratio of permanent working with Wuhan, Nanchang and base out of this dilemma. population to registered population to Hefei in jointly developing the urban reflect the ratio of migrant workers in the cluster in the middle reaches of the workforce population, which is different Yangtze River, with a view of finding a from the “state of floating urban new pole of growth in the region’s population” in the preceding dimension, development. Residential water Centralised sewage treatment Labour supply Rate of change in Carbon Total resources per capita rate and household waste floating population emissions which compares the changes in the Wuhan is another city identified as a disposal rate floating population over a five-year pilot site for the country’s resource 1 Changsha 23 25 16 6 26 96 period. conservation and environment-friendly 1 Hangzhou 26 19 9 18 24 96 According to the results of data analysis, society concept. Wuhan is also one of 3 Xiamen 13 7 23 26 25 94 Changsha and Hangzhou both rank first. the nine central cities of China, playing 4 Wuxi 19 17 18 22 11 87 Changsha’s leadership in this dimension a decisive role in the central region of 5 Zhuhai 21 23 6 23 12 85 is attributable to its pole position in the China. Among the 26 cities, it generally 6 Chengdu 12 18 19 9 22 80 variable of “carbon emissions”, second ranks second, behind Hangzhou and 6 Zhengzhou 3 26 21 15 15 80 place position in the variable of ahead of Nanjing. It outperforms “centralised sewage treatment rate and Nanjing mainly due to the impact of five 6 Wuhan 18 20 7 19 16 80 household waste disposal rate” and dimensions, including this one. 9 Fuzhou 25 7 20 7 20 79 fourth place position in the variable of 10 Jinan 6 24 22 11 13 76 Cities ranking at the bottom in this “residential water resources per capita”, 11 Suzhou 15 13 14 25 7 74 dimension are from central, western giving it the highest accumulated score. 12 Nanjing 16 10 24 17 4 71 and northeast China. In the northeast, While variable statistics can be 13 70 the positions of Harbin, Shenyang and Ningbo 22 11 11 21 5 mundane and abstract, these results Dalian are particularly noteworthy. 13 Kunming 17 4 25 16 8 70 offer a close approximation to real life. These three cities are important to 15 Qingdao 2 21 17 12 17 69 Changsha is a famous historical city northeast China and have been at a 15 Guiyang 14 13 8 13 21 69 which has made profound historical disadvantageous position for 17 Tianjin 4 2 26 24 10 66 contributions to the development of development in recent years due to the 18 Chongqing 24 14 5 1 18 62 modern China. Because of natural adjustment in industrial structure and 19 Shijiazhuang 56 resources and industrial allocations 8 22 3 4 19 changes in the geographical during the era of the planned economy, 20 Xi'an 7 5 10 5 23 50 environment. The government and Changsha shoulders a heavy burden in 21 Taiyuan 5 16 12 14 1 48 academics have paid close attention to modern city development. Starting from 22 Urumqi 11 1 13 20 2 47 this problem, establishing a the practical realities of the reform and 23 Harbin 20 3 4 3 14 44 corresponding “revitalisation strategy”. opening up period, the people of 24 Shenyang 10 9 1 8 37 This issue has also been the subject of 9 Changsha have fully leveraged the 24 much debate in the public and media, Lanzhou 1 8 15 10 3 37 regional advantages of the heartland in with public opinion focused on the 26 Dalian 9 15 2 2 6 34 the middle reaches of the Yangtze River,

25 PwC Residential water Centralised sewage treatment Labour supply Rate of change in Carbon Total resources per capita rate and household waste floating population emissions disposal rate 1 Changsha 23 25 16 6 26 96 1 Hangzhou 26 19 9 18 24 96 3 Xiamen 13 7 23 26 25 94 4 Wuxi 19 17 18 22 11 87 5 Zhuhai 21 23 6 23 12 85 6 Chengdu 12 18 19 9 22 80 6 Zhengzhou 3 26 21 15 15 80 6 Wuhan 18 20 7 19 16 80 9 Fuzhou 25 7 20 7 20 79 10 Jinan 6 24 22 11 13 76 11 Suzhou 15 13 14 25 7 74 12 Nanjing 16 10 24 17 4 71 13 Ningbo 22 11 11 21 5 70 13 Kunming 17 4 25 16 8 70 15 Qingdao 2 21 17 12 17 69 15 Guiyang 14 13 8 13 21 69 17 Tianjin 4 2 26 24 10 66 18 Chongqing 24 14 5 1 18 62 19 Shijiazhuang 8 22 3 4 19 56 20 Xi'an 7 5 10 5 23 50 21 Taiyuan 5 16 12 14 1 48 22 Urumqi 11 1 13 20 2 47 23 Harbin 20 3 4 3 14 44 24 Shenyang 10 9 1 8 9 37 24 Lanzhou 1 8 15 10 3 37 26 Dalian 9 15 2 2 6 34

Chinese Cities of Opportunity 2018 26 As a stalwart of the electronics industry, where products regularly undergo rapid Innovation poses changes and upgrades, we are keenly aware of the need to adapt to an a substantial innovation-driven approach. In Shenzhen, a city where science and challenge to technology are highly advanced, we have undertaken two key innovations. One relates to upgrades in our corporate technologies to improve production. The other has come from the establishment management of a technological incubator which, by capitalising on the resources of our industrial park, has attracted more than 20 enterprises. As a result, we are projected to increase our total output from more than CNY1 billion to up to CNY10 billion at the end of next year. In recent years, Shenzhen has grown into an international metropolis, a shift which has led to drastic changes in urban functions. Due to the initial Bai Jiangong inability of our production to keep pace Chairman of Shenzhen Linoya with the rate of development, we went Electronics Co., Ltd. through a period in which we didn’t reap satisfactory economic and social benefits. Given this, we transferred some of our production facilities to Dongguan, though kept our headquarter office, academic workstation, and scientific research centre, as well as the output of more than CNY1 billion in Shenzhen. Additionally, more spaces have been reserved for other tech-based enterprises to establish their headquarters and R&D centres, turning a production base for in-house use into a high-tech incubator base.

27 PwC At our incubator we are not engaging industries which face issues that are are no guarantee that an enterprise will with the most advanced technologically resource or monopoly based. In the succeed. To ensure a start-up prospers, innovative projects which frequently electronics industry, we are exposed to a the capacity of management is critical. have high rates of failure. Rather, taking wide array of changes, which call for Therefore, we take a discreet approach the objective reality into consideration, breakthroughs in solving these pain to construction at our technological we attract mature projects that have points, regardless of being pushed or incubator. We determine the need for the services we can provide. not. To frame this in terms of a popular development path of the incubator based Positioned as a new energy word at present, we are dealing with on the features of our business, and then technological innovation base, our “innovation”. By taking the initiative, we select enterprises which are in line with incubator forms an entire industry chain can ride this trend. If we do not, our our development goal to join. By closely for new energy vehicles, ranging from pace may slow. If we fail to adapt to the combining our own development with the development of chips to design of ongoing changes, we will end up out of the enterprises in the incubator, we are charging piles. The plan is ambitious, sync with this rapidly changing able to grow together, achieving and the upgrading process has posed environment. win-win and multi-win outcomes. substantial challenges to our Innovation poses a huge challenge to management efforts. corporate management. As I have said Braving the odds, we have opted to before; once enterprises embark along embrace innovation. There are two the path of transformation and motivating forces for this. One is that upgrading they can’t return. Having innovation is encouraged and stepped on the path, the end will either underpinned by the nation, promoted on be success or closure. With massive radios and in newspapers, and by investments of resources and talent, the government at all levels, so we are management process is destined to be immersed in a supportive environment. overturned. There is no way back to the The other driver has stemmed from our origin. A failure to establish a new endeavours to overcome difficulties we model when the old is broken will lead have encountered throughout the to bankruptcy and closure. It can be safe process. In the early stage of our start-up to conclude therefore, that heading for efforts, we were intrigued and content innovation is going to be more than a with the manufacturing program. As little bitter for enterprises. time has moved on, however, we have In fact, there have been a host of struggled with some pain points. In this problems in the implementation of the context, the options are either to be national rallying call of “mass resigned to the status quo, or to take entrepreneurship and innovation”. steps that make significant changes. In Perhaps the most notable of these fact, the former isn’t really a practical concerns the types of campaigns that option. It is even harder for us, as we have relatively high failure rates. There develop products that are technological are many cases which demonstrate that and capital intensive, rather than other enthusiasm and capital support alone

Tianjin Photo by Leon Li (PwC)

Chinese Cities of Opportunity 2018 28 VII. Culture and quality of life

This dimension represents an important built along the coast even becoming a aspect of city life, and is also an area well-known calling card for the city at where you will likely see differences home and abroad. Thanks to this between statistical data and one’s long-term commitment, this small city intuition. Only one variable is designed now occupies an indispensable place in in this dimension to reflect the cultural the various rankings of liveable cities. life of the cities, although it contains Xiamen is also one of the earliest cities several factors. As a composite variable, to open up to the world, with its time- it measures first the proportion of honoured cultural traditions, the open culture, sports and media spending in views of its residents and its peaceful fiscal expenditures. Second, it measures folk customs. Xiamen’s leading the number of professionals in the performance in this dimension is cultural, sports and entertainment attributed to the implementation of the industry as a proportion of professionals concept that beautiful scenery is an The top ranked cities for the “traffic from all industries. Additionally, the invaluable asset to city administrators. conditions” variable are relatively small lives of residents are measured via three While sustaining its rapid economic cities, including Wuxi, Suzhou, Ningbo variables: “traffic conditions”; “air development, Xiamen has laid emphasis and Xiamen, which is quite revelatory. quality”; and “standard of living”. on environmental protection and social There may be numerous reasons behind and cultural development over the long this, such as a solid urban The results of the data analysis show run, thus preserving its unique infrastructure. Other possible factors that Zhuhai comes out on top, followed characteristics. Its outstanding may include a rich cultural tradition, by Xiamen. Conversely, Nanjing, performance also supplements its which impels urban planning to follow Changsha, Fuzhou, Wuhan, Hangzhou leading position in the dimension of the law of urban development, or a high and other large cities do not hold any “major regional cities”: Xiamen is a city proportion of foreign investment from special advantages. Zhuhai’s first place defined by the balanced development of overseas. Regardless, these cities feature position is clearly the result of its urban its economy and social life. rapid economic growth, a large floating development strategy. Since the start of population and high living standards. the reform and opening up period, When it comes to the variable of They also suffer from urban challenges Zhuhai has been one of the first batch of “cultural dynamism”, the top three cities such as traffic congestion, but these are coastal cities to open itself to the outside are Chengdu, Changsha and Xi’an. not particularly serious. This will be of world, while holding up scientific Along with the fifth city Taiyuan, the great value in the future development of development and education as a seventh city Guiyang and the ninth these cities. long-term goal in its development cities Shijiazhuang and Lanzhou (tied), strategy, and thus realising a balanced most of them are central and western allocation of industrial distribution and cities. One factor at play here is that our residential planning. The urban statistical methodology cannot parse out planning layout of roads, housing and the activeness of a city’s cultural parks is orderly and takes into account industry. From practical observation, the needs of the developing tourism developed coastal cities have a rich industry in neighbouring Macau. Green cultural industry, as film, drama, aquaculture and vegetable science culture weeks and multimedia have centres have enhanced the standard of expanded the cultural domain, while a living in the city. When it comes to variety of leisure and entertainment industrial planning, the local R&D activities have enriched city life. This is centres of large enterprises and branch a limitation in the statistical campuses of famous universities are methodology. easily visible here, with the Lovers’ Road

29 PwC Tianjin Photo by Faust Ren (PwC)

Cultural dynamism Traffic conditions ir quality Standard of living Total

1 Zhuhai 18 18 25 26 87 2 iamen 11 23 26 16 76 2 Nanjing 23 15 13 25 76 2 Changsha 26 12 15 23 76 5 Fuzhou 14 17 23 21 75 6 uhan 18 21 12 22 73 7 Hangzhou 22 10 16 24 72 8 Ningbo 14 24 21 11 70 9 Guiyang 20 9 24 14 67 10 Suzhou 7 25 17 14 63 11 Dalian 11 11 20 17 59 12 Tianjin 20 22 6 10 58 12 ui 4 26 14 14 58 12 Taiyuan 22 19 2 15 58 15 Chengdu 26 6 11 10 53 16 ian 24 4 4 19 51 17 ingdao 3 20 19 8 50 18 Shenyang 5 14 9 18 46 19 Lanzhou 18 8 7 4 37 20 Shijiazhuang 18 16 1 1 36 21 Zhengzhou 11 13 3 7 34 22 Jinan 6 1 5 21 33 23 rumqi 12 5 8 7 32 24 Kunming 3 3 22 3 31 25 Chongqing 1 7 18 2 28 26 Harbin 8 2 10 5 25

Chinese Cities of Opportunity 2018 30 VIII. Economic clout

A city is the product of its economic well-known enterprises”, while Tianjin Chongqing has a great deal of real world growth, and that growth in turn shapes secured first place on two variables. economic clout, this is not evident in our the city. To an extent, urban scale can Tianjin, as a municipality under the assessment, due its large area and the reflect the influence that a city wields on central government, only ranks seventh number of counties attached to it. This the surrounding area as well as on small among 26 cities. This is related to becomes especially evident in the and medium-sized cities. We’ve made traditional economic structural factors variable of “total power of agricultural observations based on six starting as well as our evaluation method. PwC’s machinery”, with Chongqing ranking at points: “number of well-known assessment tools use more ratios, such the bottom. First, Chongqing has a vast enterprises”; “number of financial as relative share data, to compare cities rural area, giving it a larger practitioners”; “foreign direct of varying sizes. That means cities with denominator in the computational investment”; “proportion of the urban large rural areas lose an advantage. formula; second, Chongqing is located in service industry”; “nominal growth rate Tianjin manages to excel in this a mountainous area, with small plots of of gross regional domestic product”; and dimension partly because its score on arable land unsuitable for mechanised “total power of agricultural machinery”. the “number of financial practitioners” agriculture, reducing the numerator of Among them, the variables that reflect variable is high. Chongqing, another our computational formula. As a result the degree of enterprise clustering, municipality under the central of these objective factors, Chongqing foreign investment, service industry and government, is in a similar situation. invariably ranks at the bottom. GDP growth rate are relatively intuitive, Notwithstanding the fact that while “number of financial practitioners” and “total power of agricultural machinery” are unique. Number of well-known Number of financial Foreign direct investment Proportion of the urban Nominal growth rate of gross Total power of agricultural Total When we observe the variables related enterprises practitioners service industry regional domestic product machinery to the number of personnel, we 1 Hangzhou 26 23 24 22 24 19 138 generally use the relative numbers as a 2 Tianjin 19 26 26 15 13 17 116 share of the total employment 3 Chengdu 24 24 21 12 25 9 115 population. But number of financial 4 11 19 22 114 practitioners are different in that even Wuhan 23 18 21 though business scope is related to 5 Xiamen 20 7 19 20 17 25 108 territory, it’s not restricted to the region. 6 Ningbo 22 19 18 1 15 24 99 Therefore, when measuring the 6 Chongqing 22 25 22 3 26 1 99 influence of a city, we directly use the 6 Changsha 16 15 15 4 23 26 99 absolute number of financial 9 Nanjing 25 10 18 19 10 14 96 practitioners. Total power of agricultural 9 Xi'an 17 20 12 23 8 16 96 machinery production reflects the 11 Jinan 15 22 8 21 6 18 90 degree of industrial application of 12 Qingdao 5 12 25 13 7 20 82 agricultural production. Because each 13 Zhengzhou 4 21 10 9 20 13 77 Chinese city has several counties under 14 Fuzhou 14 6 13 6 22 15 76 its jurisdiction, it can draw on vast rural 15 Suzhou 18 14 5 5 74 areas as its supply base for farming and 24 8 agricultural by-products and the source 15 Zhuhai 8 1 16 5 21 23 74 of its urban labour force in certain 17 Kunming 14 8 6 16 14 6 64 service sectors. Therefore, evaluating a 18 Dalian 9 16 12 10 2 12 61 city by itself without also considering its 19 Harbin 10 17 9 18 4 2 60 rural and agricultural production is too 20 Wuxi 7 9 14 7 12 10 59 single-faceted. 21 Taiyuan 11 5 2 25 11 4 58 The results of data analysis show that 22 Guiyang 3 4 6 17 18 8 56 the top two cities in terms of “economic 22 Shijiazhuang 2 11 4 2 16 21 56 clout” are Hangzhou and Tianjin. 24 Urumqi 14 2 3 26 3 7 55 Hangzhou’s position is attributed to its 25 Lanzhou 2 3 1 24 9 11 50 top score in the variable of “number of 26 Shenyang 6 13 7 14 1 3 44

31 PwC Chengdu Tianfu Software Park

As for the special variable of “total agricultural mechanisation is relatively The most important factor in the power of agricultural machinery”, the high. Xiamen, Ningbo and Zhuhai are all economic clout of a city is its connection top cities are Changsha, Xiamen, Ningbo coastal cities in southeastern China, with large or international cities, which and Zhuhai. Changsha is an important where arable land resources tend to be our assessment tools do not specifically city for engineering machinery and less abundant. However, because of address. To evaluate the economic clout particularly developed in terms of its their rich fishery resources and vast tidal of a specific city, it is also necessary to private industrial enterprises. Products flats, the degree of aquaculture consider its geographical environment, are developed by closely following mechanisation is high. As a result, the industrial characteristics and specific market trends, and their industrial three non-provincial-capital coastal relationship with other factors, thereby machines are widespread and used cities rank among the top in this ascertaining the development everywhere. As a result, the degree of variable. opportunities and prospects applicable to that city.

Number of well-known Number of financial Foreign direct investment Proportion of the urban Nominal growth rate of gross Total power of agricultural Total enterprises practitioners service industry regional domestic product machinery

1 Hangzhou 26 23 24 22 24 19 138 2 Tianjin 19 26 26 15 13 17 116 3 Chengdu 24 24 21 12 25 9 115 4 Wuhan 23 18 21 11 19 22 114 5 Xiamen 20 7 19 20 17 25 108 6 Ningbo 22 19 18 1 15 24 99 6 Chongqing 22 25 22 3 26 1 99 6 Changsha 16 15 15 4 23 26 99 9 Nanjing 25 10 18 19 10 14 96 9 Xi'an 17 20 12 23 8 16 96 11 Jinan 15 22 8 21 6 18 90 12 Qingdao 5 12 25 13 7 20 82 13 Zhengzhou 4 21 10 9 20 13 77 14 Fuzhou 14 6 13 6 22 15 76 15 Suzhou 18 14 24 8 5 5 74 15 Zhuhai 8 1 16 5 21 23 74 17 Kunming 14 8 6 16 14 6 64 18 Dalian 9 16 12 10 2 12 61 19 Harbin 10 17 9 18 4 2 60 20 Wuxi 7 9 14 7 12 10 59 21 Taiyuan 11 5 2 25 11 4 58 22 Guiyang 3 4 6 17 18 8 56 22 Shijiazhuang 2 11 4 2 16 21 56 24 Urumqi 14 2 3 26 3 7 55 25 Lanzhou 2 3 1 24 9 11 50 26 Shenyang 6 13 7 14 1 3 44

Chinese Cities of Opportunity 2018 32 IX. Cost

This dimension covers six variables, government websites, and the disclosed “average salary of employees”; “public information is correct and credible. transport cost”; “cost of commercial The data analysis shows that most of the land”; “housing price”; “food price”; and top scorers, namely cities with lower “domestic services prices”. Observations living expenses, are mainly located in are made from the perspective of an the central and western regions, while investor in terms of labour costs and low scorers, or cities with higher living other various outlay expenses. The cities costs, are located in southeastern China. demonstrate only minute differences in If Beijing, Shanghai, Guangzhou and the data analysis for this dimension, but Shenzhen were included in this ranking, due to the lower average salaries in this trend would be more evident. China, slight differences in living Taiyuan and Shijiazhuang secure the expenses can have an impact on first and second positions respectively in consumption tendencies. this dimension. Taiyuan’s high score is The data for this dimension are sourced attributed to its lower “public transport from chinaprice.com.cn, a commercial cost” and “domestic services prices”, authority. The price data originate from while Shijiazhuang’s superior

verage salary of Public transport Cost of commercial Housing price Food price Domestic services prices Total employees cost land

1 Taiyuan 23 26 21 22 22 24 138 2 Shijiazhuang 25 24 25 12 25 14 125 3 Shenyang 20 17 24 24 24 12 121 3 Kunming 18 20 26 21 20 16 121 5 Harbin 24 17 12 23 20 20 116 6 rumqi 13 14 19 26 12 24 108 7 Dalian 12 6 24 16 23 26 107 8 Guiyang 15 24 22 25 11 2 99 9 Zhengzhou 26 11 4 14 15 24 94 10 ian 16 22 7 20 10 9 84 11 Suzhou 5 21 9 9 21 18 83 12 Lanzhou 22 14 3 18 3 21 81 13 ui 6 17 15 15 18 8 79 14 uhan 14 19 20 11 9 4 77 15 Chongqing 21 5 5 17 6 20 74 16 Chengdu 11 3 17 13 18 10 72 17 iamen 17 14 16 1 5 15 68 18 Jinan 8 19 1 7 26 5 66 18 Ningbo 4 4 19 10 16 13 66 18 Tianjin 2 8 13 5 13 25 66 21 Fuzhou 19 9 7 3 8 17 63 22 ingdao 9 25 2 6 8 6 56 22 Changsha 7 7 14 19 2 7 56 24 Nanjing 1 10 10 4 14 11 50 25 Zhuhai 10 2 8 8 1 1 30 26 Hangzhou 3 1 12 2 4 3 25

33 PwC performance is a result of its high scores Among the 26 cities, Hangzhou has the in the variables of “average salary of highest investment and cost of living, employees”, “cost of commercial land” especially in the variables of “housing and “food price”. price” and “public transport cost”. Zhuhai follows Hangzhou in this Urumqi has a high ranking among the dimension, as the second most 26 cities. Its top position in the variable expensive of 26 cities. This is because of of “housing price” not only demonstrates its top position in the variables of “food the real cost of living, but also price” and “domestic services prices”. contributes to its higher total score. In The general feeling among the people the general ranking, Urumqi surpasses also confirms the high level of Shijiazhuang, Harbin and Lanzhou consumption in these two cities. As partly because of its high score in this cities grow their economy and living variable (Urumqi also delivers an standards improve, social living costs outstanding performance for the eighth also increase as a general rule. For city dimension, the “proportion of the urban managers, improving management service industry” variable.) efficiency and reducing social transaction costs is a problem that calls for constant research and testing.

verage salary of Public transport Cost of commercial Housing price Food price Domestic services prices Total employees cost land

1 Taiyuan 23 26 21 22 22 24 138 2 Shijiazhuang 25 24 25 12 25 14 125 3 Shenyang 20 17 24 24 24 12 121 3 Kunming 18 20 26 21 20 16 121 5 Harbin 24 17 12 23 20 20 116 6 rumqi 13 14 19 26 12 24 108 7 Dalian 12 6 24 16 23 26 107 8 Guiyang 15 24 22 25 11 2 99 9 Zhengzhou 26 11 4 14 15 24 94 10 ian 16 22 7 20 10 9 84 11 Suzhou 5 21 9 9 21 18 83 12 Lanzhou 22 14 3 18 3 21 81 13 ui 6 17 15 15 18 8 79 14 uhan 14 19 20 11 9 4 77 15 Chongqing 21 5 5 17 6 20 74 16 Chengdu 11 3 17 13 18 10 72 17 iamen 17 14 16 1 5 15 68 18 Jinan 8 19 1 7 26 5 66 18 Ningbo 4 4 19 10 16 13 66 18 Tianjin 2 8 13 5 13 25 66 21 Fuzhou 19 9 7 3 8 17 63 22 ingdao 9 25 2 6 8 6 56 22 Changsha 7 7 14 19 2 7 56 24 Nanjing 1 10 10 4 14 11 50 25 Zhuhai 10 2 8 8 1 1 30 26 Hangzhou 3 1 12 2 4 3 25

Chinese Cities of Opportunity 2018 34 In the Government Work Report Kong-Macau Bay Area. Obviously, the delivered on March 2017, Premier Li Bay Area has more international Deepening Keqiang announced that a Guangdong- features, and with it, related Hong Kong-Macau Bay Area city cluster advantages. One of these relates to the development plan should be arranged. manufacturing industry. Due to the cooperation Subsequently, on July 1, witnessed by Pearl River Delta region being closely President Xi Jinping during the integrated with world trade, the region between celebration of the 20th Anniversary of is an attractive spot for international the return of Hong Kong to China, the investment. A second advantage relates Guangdong, National Development and Reform to Hong Kong’s position as an Commission (NDRC), the Guangdong international financial center. A third Provincial Government, the Hong Kong benefit is that strategic emerging Hong Kong SAR Government and the Macau SAR industries that are closely integrated Government signed the Framework with technological innovation attract and Macau Agreement on Deepening Guangdong- international talent. Concurrently, the Hong Kong-Macau Cooperation in the development of cities in the Pearl River to build a Development of the Bay Area. The Delta are relatively balanced, which signing provided a broader vision and facilitates cooperation and competition outlook for construction of the Bay Area. among cities. These conditions provide world-class the Bay Area with broad development The concept of the Bay Area has been potential. bay area inspired by examples in the international community, such as the Nevertheless, challenges to cooperation Bay Areas in New York City, San between Hong Kong, Macau and the Francisco and Tokyo, among others. The Pearl River Delta cities exist due to their Bay Area, featuring an open, coastal and differences in economic and legal livable environment, promotes the systems. Consequently, there is a development of surrounding areas and particular impetus to deepen helps to form a city cluster. cooperation between Guangdong, Hong Consequently, it plays an important role Kong and Macau, a need which is adding to the international economy. reflected in the NDRC’s framework Proposing the concept of the agreement. The 19th National Congress Zhang Yueguo Guangdong-Hong Kong-Macau Bay of the Communist Party of China arrived Area is of historic significance. The plan, at a major conclusion that socialism with President and Secretary of the which pivots on cooperation and Chinese characteristics has entered a Leading Party Members’ Group development of the Bay Area, takes into new era. China will begin this novel of Guangzhou Academy of consideration the integration and journey through continuing Social Sciences connectivity of the Pearl River Delta- comprehensive reform, while making the earliest opening-up pilot area in new ground by pursuing opening up on mainland China-with Hong Kong and all fronts. Subsequently, efforts will turn Macau SARs, two great contributors to to the modernisation of both state China’s opening up. governance and social governance. The Bay Area should carry out cooperative At the national strategic level, the construction with new exploration and concept of three major city clusters is bold innovation, becoming a budding pilot being developed with the Yangtze River area with an important role in leading the Economic Belt, the Beijing-Tianjin- way in reform and opening up. Hebei Region and the Guangdong-Hong

35 PwC The construction of the Guangdong- III. Developing countries will be relied Hong Kong-Macau Greater Bay Area has on to share benefits stemming from The Belt been upgraded to a national late-mover advantages. Macau shares development strategy, and due to its close relations with countries from pivotal importance, will have a ASEAN and Africa, as well as PSCs, and Road significant influence on the Belt and many of which have relatively smaller Road Initiative. economies. However, the rich resources, Initiative political stability and low labour costs of I. Southeast Asian countries along the these countries can contribute to their Belt and Road will be encouraged to continued development and and the participate in the development by advancement. With the right direction, focusing on node cities. Macau is well and support from advanced science and placed as a node city of both the Silk construction technology, these economies will reap Road and Maritime Silk Road and enjoys gains from their having later-mover natural relations with Southeast Asian of Guangdong- advantages, which will be unmatched by countries both historically and via the their developed counterparts. flow of people. Consequently, amid the Hong Kong- organic interaction between the IV. Macau’s engagement in the construction of the Bay Area and the construction of the Bay Area will benefit Macau Belt and Road Initiative, Macau will not “Policy Communication”. Owing to the only contribute to the dual projects, but different social systems and legal Greater Bay also facilitate Southeast Asian countries regimes of Guangdong, Hong Kong, and in contributing to the development. Macau, there is a need to create new rules on an equal, mutually-beneficial, II. The cooperation platform between Area and practical basis premised on in-depth China and Portuguese-speaking discussion and research at the policy countries (PSCs) will be utilised to and legal level. The emerging rules will support PSCs with a convenient means serve as a common code for the three to participate in the development of the parties and a reference for the Belt and Road Initiative. Many PSCs are implementation of “Policy keen to take part in the construction, Communication” as part of the Belt and though due to geographical restrictions Road Initiative. This will also serve as a it can be difficult for them to get common regulation for countries, involved. Macau, which plays a vital role developing countries in particular, to in building the Bay Area and developing seek mutually beneficial and win-win the Belt and Road Initiative, also serves Zhou Ping results and shared growth by equal as a platform that provides business consultation in the process of building Director of Research Center on the cooperation services for China and the Belt and Road. Furthermore, Belt and Road Initiative (Macau) at PSCs. As a result, enterprises from PSCs relevant experience is likely to be gained City University of Macau expect to develop their businesses in in helping developing countries and seek mutual opportunities with eliminate the hegemonism and Macau. The involvement of Macau in the monopolism that developed countries construction of the Bay Area and the Belt have in dealing with international and Road Initiative could lead to new affairs, in addition to formulating opportunities for its own development as establishing international principles that well as for companies from PSCs located align with their common interest. In there. Further, more enterprises and doing so, they will be laying a solid institutions from PSCs will be attracted to foundation to play a more active role in Macau, thereby promoting the international affairs. construction of the Bay Area.

Chongqing Photo by James Yang (PwC)

Chinese Cities of Opportunity 2018 36 X. Ease of doing business

Distinct from liveable city metrics, the Suzhou ranks first in the “fiscal balance” In addition, Xiamen, the fifth city in the ease of doing business focuses more on variable, which means that its financial general ranking, placed first and second, whether a city has the soft power to allocations can ensure continuous, respectively, in the variables for attract development from domestic and stable and coordinated market “reliance on foreign trade” and “logistics foreign companies from the perspective development. Meanwhile, stable local efficiency”. The “reliance on foreign of an investor. To comprehensively public finances can also create a safe trade” variable is measured by the share review the ease of doing business in a investment atmosphere, attracting more of GDP from total imports and exports. city, this dimension includes seven capital inflows. Thanks to its strong Xiamen’s top ranking is attributed to its variables, namely “convenience for support for innovation and increased innovation and entrepreneurship”; “labour disputes”; entrepreneurship in recent years, entrepreneurship in recent years. As a “logistics efficiency”; “capital market Hangzhou comes out on top in the result, high-tech products from engagement”; “business operation variable of “convenience for industries such as biotechnology, risks”; “fiscal balance”; and “reliance on entrepreneurship”. As the birthplace computer-integrated manufacturing foreign trade”, to reflect the market and headquarters for Alibaba Group, technology, materials technology and economic environment and Hangzhou has evolved into China’s most photoelectric technology have become comprehensive governance of the city. important e-commerce centre, high-tech important supporters for the export Upon analysis of the 26 cities’ variables, the industrial base and centre of innovation. sector, driving exports to rebound and top three highest total scores were posted recovery. The BRICS Summit held in by Suzhou, Nanjing and Hangzhou. Xiamen in 2017 brought new

Convenience for Labour disputes Logistics efficiency Capital market Business operation risks Fiscal balance Reliance on foreign Total entrepreneurship engagement trade

1 Suzhou 25 12 14 18 23 26 24 142 2 Nanjing 22 12 23 22 23 23 15 140 3 Hangzhou 26 8 22 24 9 24 18 131 4 Wuxi 24 12 14 8 23 25 21 127 5 Xiamen 21 19 25 14 3 18 26 126 6 Wuhan 21 15 22 17 20 21 8 124 7 Zhuhai 17 6 24 12 25 8 25 117 8 Zhengzhou 11 23 9 20 16 15 20 114 9 Ningbo 19 8 26 6 9 19 23 110 10 Urumqi 19 16 12 1 24 22 7 101 11 Tianjin 17 2 9 25 17 12 17 99 12 Changsha 17 20 19 10 19 10 2 97 13 Fuzhou 17 19 15 15 3 11 16 96 14 Jinan 11 14 22 16 6 20 4 93 14 Qingdao 17 14 7 13 6 17 19 93 16 Dalian 5 4 17 21 12 9 22 90 16 Chengdu 23 5 5 26 7 13 11 90 16 Xi'an 11 24 7 19 10 6 13 90 19 Chongqing 11 1 4 23 26 4 12 81 20 Taiyuan 5 25 16 4 4 5 14 73 21 Guiyang 17 9 19 3 14 7 3 72 22 Kunming 11 17 12 9 1 16 5 71 22 Shijiazhuang 5 22 12 5 15 3 9 71 24 Shenyang 11 4 4 11 12 14 10 66 25 Lanzhou 5 26 2 2 18 2 6 61 26 Harbin 5 21 1 7 13 1 1 49

37 PwC development opportunities to Xiamen, the number of express items collected entrepreneurship and developing the and its import-export volume with the and delivered in Xiamen reached an new economy, promoting the BRICS countries witnessed an increase all-time high of 7 million. All cargo bays development of Wuhan in strengthening of 60% in the first half of 2017. of inbound and outbound flights with business innovation and Meanwhile, China’s international trade Xiamen Airlines were full, reflecting its entrepreneurship, while establishing has transformed over time from being powerful logistics handling capacity. Wuhan as an important city in the rise externally to internally driven. This of Central China. Wuhan, the sixth-highest scorer, rose helps address the issues faced by cities significantly in the ranks from the Another notable point is that Lanzhou’s that rely heavily on foreign trade to previous year’s report. Wuhan increased performance was outstanding in the achieve sustainable development for its ranking in this dimension due to variable of “labour disputes”, despite its external trade. The “logistics efficiency” broad-based improvements in its relatively low overall ranking, grabbing variable is composed of “per capita strengths, with the largest increase first place for the fourth consecutive freight volume” and “per capita volume posted in the “convenience for year. This reflects the importance that of express delivery businesses”. Xiamen entrepreneurship” variable. This can be enterprises in Lanzhou place on is second only to Ningbo in this variable. attributed to the efforts made in recent operational risks posed by employees, Both cities are important central cities years by Wuhan to encourage business while the market environment is on China’s east coast. With the Port of innovation and start-ups. In 2017, another possible factor at play. Zhoushan, which boasts the world’s Wuhan issued the Policies to Support Generally, a higher score in this variable largest handling capacity, Ningbo enjoys Innovation, Entrepreneurship and New demonstrates how convenient it is for exceptional advantages. Apart from the Economy Development at the Wuhan enterprises to maintain order in its geographical advantages of its port, East Lake High-tech Development Zone, production processes. Xiamen’s rapid e-commerce development which were called the “Ten New Golden has also contributed to its improved Policies”. These policies draw from best logistics efficiency. In the first three days practices both at home and abroad in of Double Eleven shopping day in 2017, supporting innovation and

Convenience for Labour disputes Logistics efficiency Capital market Business operation risks Fiscal balance Reliance on foreign Total entrepreneurship engagement trade

1 Suzhou 25 12 14 18 23 26 24 142 2 Nanjing 22 12 23 22 23 23 15 140 3 Hangzhou 26 8 22 24 9 24 18 131 4 Wuxi 24 12 14 8 23 25 21 127 5 Xiamen 21 19 25 14 3 18 26 126 6 Wuhan 21 15 22 17 20 21 8 124 7 Zhuhai 17 6 24 12 25 8 25 117 8 Zhengzhou 11 23 9 20 16 15 20 114 9 Ningbo 19 8 26 6 9 19 23 110 10 Urumqi 19 16 12 1 24 22 7 101 11 Tianjin 17 2 9 25 17 12 17 99 12 Changsha 17 20 19 10 19 10 2 97 13 Fuzhou 17 19 15 15 3 11 16 96 14 Jinan 11 14 22 16 6 20 4 93 14 Qingdao 17 14 7 13 6 17 19 93 16 Dalian 5 4 17 21 12 9 22 90 16 Chengdu 23 5 5 26 7 13 11 90 16 Xi'an 11 24 7 19 10 6 13 90 19 Chongqing 11 1 4 23 26 4 12 81 20 Taiyuan 5 25 16 4 4 5 14 73 21 Guiyang 17 9 19 3 14 7 3 72 22 Kunming 11 17 12 9 1 16 5 71 22 Shijiazhuang 5 22 12 5 15 3 9 71 24 Shenyang 11 4 4 11 12 14 10 66 25 Lanzhou 5 26 2 2 18 2 6 61 26 Harbin 5 21 1 7 13 1 1 49

Chinese Cities of Opportunity 2018 38 Variables

I. Intellectual capital and Key Laboratories and the 2015 Annual innovation Report on State Key Laboratories of Enterprises, issued by the Ministry of Turnover rate of full-time Science and Technology, and the List of teachers Chinese Universities in 2017 by Wu Shulian. The educational resources of every city are measured by calculating the ratio of Entrepreneurial environment full-time teachers of middle and primary schools in 2016 to the respective figures This variable uses the China in 2011. Data sources are the China City Entrepreneurship and Innovation Index Statistical Yearbook 2017 and China City released by the Administrative Statistical Yearbook 2012. Committee of the Zhongguancun Science Park in Beijing to measure the Scale of secondary vocational entrepreneurial environment of every city. The value attributed to each city education reflects the mean of the 12 monthly Skilled workers underpin smart urban scores in the entrepreneurship and development. This variable identifies the innovation index in 2017. proportion of students in secondary education that are in secondary Innovation application vocational schools. The measure This variable examines the indicates future availability of technical socioeconomic benefits derived from workers in a city. The data is sourced from innovation as a basic driving force the China City Statistical Yearbook 2017. behind urban development, and the contribution of innovative industries to Proportion of spending on each city’s economic growth. Given that science and technology the Growth Enterprise Market (GEM) This variable evaluates the scientific and serves as an important funding platform technological resources of cities by for supporting independent innovation tracking the proportion of public funds and fostering the growth of small/ allocated to science and technology. The medium-sized hi-tech enterprises, this source of the data is the China City report assesses the local level of Statistical Yearbook 2017. innovative applications by measuring the number and revenue of GEM-listed Level of research and companies in the respective cities. Data development is sourced from the website of Wind. This variable primarily considers a city’s capacity for innovative technology and II. Technical maturity potential for scientific research. It refers to the number of key state laboratories Internet plus (including enterprise laboratories) as Data for this variable comes from the well as the scientific research level of 2017 China Internet Plus Digital Economy major universities. The data is derived Index released by Tencent Research from the 2015 Annual Report on State Institute. It aims to assess application of

39 PwC the Internet, as well as the scale and respective provincial-level This variable aims to reflect demand in maturity of development of the digital administrative areas are used to each city for air passenger and cargo economy in each city. calculate the scores. transportation. The ranking is based on the number of inbound and outbound Digital economy Number of high-tech incubators flights to and from the cities’ main A city’s digital economy is determined This variable uses the number of airports. Figures include international by the ranking in the China Urban state-level high-tech incubators and domestic flights for civilian use, E-Commerce Development Index Report identified by the Ministry of Science and cargo flights and non-revenue flights 2016, published by AliResearch. The Technology as a gauge of each city’s (excluding military aircraft). As there is variable charts the application and commitment to creating an environment no airport in Suzhou, the ranking of its development status of e-commerce in for independent innovation. By neighbouring city Ningbo is referred to. every city, mirroring their industrial inference, it also hopes to shed light on The source of the data is the Rankings of upgrading process. each city’s efforts to develop high-tech Throughput Capacity of Civil Aviation industry, foster entrepreneurs and small Airports 2016 published by the Civil Software and multimedia and medium-sized technology Aviation Administration of China. design enterprises. Further, it aims to show Passenger capacity This variable uses the income from each scale of investment and promote the city’s software industry to evaluate the level of engagement in regional Passenger capacity spans railroads, civil scale of development of software services scientific and technological innovation, aviation, highways and water transport. and gauge how effective industrial in addition to economic growth. The It is used to indicate the size and upgrading has been. The data is sourced data is collected up to December 2017. carrying capacity of passenger transport from the Completion Status Sheets of of the cities. Data sources are the 2017 Major Economic Indicators of Software III. Major regional cities statistical yearbooks and bulletins of and IT Services of Sub-provincial Cities each city. from January to November 2016 (I and II) Star-graded hotels issued by the Ministry of Industry and This variable uses the number and Freight volume Information Technology of China. In the average occupancy rates of hotels rated Freight volume is an indicator of the instances in which individual cities don’t three stars or above in every city to production results of transportation by disclose the income of their software measure the supply and demand and rail, road and air. It reflects the pivotal industry, measurements and calculations market saturation levels of star-graded role that the logistics of each city play in are based on data of the provincial hotels. Data is sourced from the adding to the respective regional administrative areas that the cities are in. appendix of the 2016 Statistical Bulletin economies. The data comes from the on Star-graded Hotels in China, released 2017 statistical yearbooks and bulletins Technology market size by the National Tourism Administration. of each city. This indicator uses the turnover of technology output and input to evaluate International tourists Exhibition/convention economy the hi-tech capabilities and state of The appeal of cities to International development index hi-tech research commercialisation in travellers is measured by entry and This variable is based on the composite each city. The data comes from the overnight visits by overseas tourists and index of urban exhibition development Annual Report on National Technology average duration of stay per arrival. The in the 2016 China Exhibition Data Markets Statistics 2017 issued by the data source for this indicator is the Statistical Report 2.0, released by the Ministry of Science and Technology. For Yearbook of China Tourism 2017. China Convention and Exhibition cities that have yet to disclose the Research Society. It aims to evaluate the required data, information for their Inbound and outbound flights developments of the exhibition industry

Chinese Cities of Opportunity 2018 40 of every city using several metrics, V. Transportation and urban Available housing for residents including the number of specialised planning This variable uses per capita exhibition halls, area of indoor exhibition investments in real estate development halls, number of exhibitions held Road area per capita to review the capital input and indicate annually, and total exhibition floor area. This data, taken from the China Urban market supervision directed at Construction Statistical Yearbook 2016, improving the living conditions for IV. Health, safety and public is used to assess the road facilities of residents of each city. Data is sourced security each city. from the statistical yearbooks of each city, and the National Bureau of Medical resources Public transit system Statistics. This variable takes the number of This variable uses the number of buses medical practitioners (including available for every 10,000 people and VI. Sustainable development assistant medical practitioners) the passenger transport turnover rate of and natural environment available for every 10,000 people, as a public transit to measure the passenger measure of each city’s capacity to capacity and operating efficiency of the Residential water resources per provide medical services. Data is from public transit network of every city. The capita the National Bureau of Statistics. data is sourced from the China City This variable uses the ratio of the total Statistical Yearbook 2017. quantity of water resources to Medical facilities permanent population as a measure of This variable considers the numbers of Rail transit coverage the reserve of water resources in each Grade A tertiary hospitals to assess the This variable takes the mileage of rail city. The data source is the China City service level of the medical system for transit lines operated for every 10,000 Statistical Yearbook 2017. each city. Data is sourced from the people as a measure of rail transit website of the National Health and development in every city, indicating Centralised sewage treatment Family Planning Commission. approaches to urban planning. The data rate and household waste is from the 2016 Statistical and Analysis disposal rate Elderly care Report on Urban Rail Transit released by This indicator uses the coverage rate of the China Urban Rail Transit This variable measures the resource urban basic public pensions in urban Association. utilisation efficiency of every city in centers to measure the development of terms of treatment of sewage and each city’s elderly care system. The data Urban expansion rate household waste disposal, to highlight development of the recycling economy comes from the China City Statistical This variable uses the ratio of the area of in each city. Data is sourced from the Yearbook 2017. requisitioned land to the area of built-up China Urban Construction Statistical land in each city over the year. The Yearbook 2016. Urban traffic safety index source of the data is the China Urban This index reflects the traffic safety in Construction Statistical Yearbook 2016. Labour supply cities by reviewing the mortality rates of road traffic per 10,000 vehicles. The State of floating urban This variable measures changes in data source is the China Research Report population population at a working age in each city on the Development of Road Traffic in by comparing the total number of This variable adopts the ratio of the employees in the current year with that Metropolitan Cities. Available data permanent population in 2016 to that in covers up to the end of 2015. of the prior year. The data is sourced 2011, to illustrate change in labour from the statistical yearbooks and sources and speed of population migration bulletins of each city. Loss due to disasters of every city. The data is sourced from the This variable uses the ratio of statistical yearbooks and bulletins of every Rate of change in floating compensation expense to premium city in 2017 and 2012. population income of property insurance to determine economic loss caused by Green area This variable uses the ratio of permanent population to registered disasters. The data source is the China Green area per capita and ratio of green population to reflect the supply of Insurance Statistical Yearbook 2017. coverage to built-up areas are used to floating labour in every city. Sources for gauge each city’s green area. Data is the data are the statistical yearbooks sourced from the China Urban and bulletins of every city and the Construction Statistical Yearbook 2016. National Bureau of Statistics.

41 PwC Carbon emissions for convenience and comfort in daily dynamic indicator to show the vigour of This variable takes carbon emissions per life. Data is sourced from the China City an economy. The source of data is the unit of GDP generated from coal, crude Statistical Yearbook 2017. National Bureau of Statistics. oil, diesel oil, gasoline, kerosene, fuel oil, natural gas and coke, consumed by VIII. Economic clout Total power of agricultural each city to monitor the degree of machinery greenhouse effects in each city. Data Number of well-known Agricultural mechanisation is the sources are the 2017 statistical enterprises physical foundation of modern yearbooks and bulletins of every city. This variable uses the number of agricultural development, and an registered headquarters of China’s top important component for sustainable VII. Culture and quality of 500 companies and the number of development of new rural areas, which life companies listed on the Shanghai and have significant economic impact. This Shenzhen A-shares markets in every variable uses the total power of Cultural dynamism city. It reflects the status of the cities in agricultural machinery per 10,000 hectares of cultivated land to measure This variable looks at the scale of the their regional economies, and their the development level of agricultural cultural industry in every city. Two capacity for influencing the economy of mechanisation in each city. Data sources factors are used; fiscal expenditure on the surrounding areas. Data is sourced are the statistical yearbooks and cultural, sports and media industries, from the "China Top 500" in 2017, bulletins of every city in 2017. and the proportion of cultural, sports released by Fortune’s Chinese website and entertainment practitioners in each and the website of Wind. city. Data is sourced from the statistical IX. Cost yearbooks and bulletins of every city in Number of financial 2017 and the China City Statistical practitioners Average salary of employees Yearbook 2017. This variable reflects the scale of This variable uses the average salary to development of the financial industry in compare the cost of employees that Traffic conditions each city, using the number of financial enterprises in each city bear. The source Evaluation of this variable adheres to practitioners of the city at year-end. The of data is the National Bureau of the rankings of the all-day congestion data source is the China City Statistical Statistics. delay index in the China Traffic Analysis Yearbook 2017. Report of Major Cities 2017 released by Public transport cost AutoNavi. Foreign direct investment This variable takes the fares of urban This variable measures the development buses and taxis as standards for Air quality level of the externally-oriented economy measuring the mobility cost in the cities. This variable adopts the composite index of every city, using the number of signed Data is sourced from chinaprice.com.cn. of average annual air quality to assess projects of foreign direct investment and air quality of each city. The index the amount of foreign investment in Cost of commercial land evaluates levels of six pollutants namely; actual use for the year. The data source This variable compares the lease price of fine particulate matter (PM2.5), is the China City Statistical Yearbook offices and commercial rentals in each inhalable particles (PM10), sulphur 2017. city. Suzhou, Wuxi and Zhuhai do not dioxide (SO2), nitrogen dioxide (NO2), disclose relevant data, so the median of ozone (O3) and carbon monoxide (CO). Proportion of the urban service the quoted price of second-hand housing The larger the index, the more severe industry is taken as reference. Data is sourced the pollution is. Data is sourced from the This variable uses the proportion of the from the China Price Information monthly air quality reports of 74 cities in added-value of the tertiary industry in Network. 2017, released by the China National the regional GDP to reflect changes in Environmental Monitoring Centre each city’s urban economic structure Housing price (CNEMC). and the status of transition from This variable takes the median of the production to service. The source of data quoted price of second-hand residential Standard of living is the National Bureau of Statistics. housing of the Chinese cities in 2017 to This variable is made up of two factors. measure the living costs. The data is The first is measuring residents’ Nominal growth rate of gross sourced from the Housing Big Data Joint spending power by retail sales of regional domestic product Laboratory and the Housing Big Data consumer goods per capita. The second This variable compares the final GDP Project Team of the National Academy of is domestic electricity consumption per and GDP of the base period adjusted Economic Strategy, the Chinese capita, which is used to reflect demand according to current price. It is a Academy of Social Sciences.

Chinese Cities of Opportunity 2018 42 Food price (including autonomous regions and administrative areas (including This variable takes the prices of rice, municipalities), the evaluation is based autonomous regions and municipalities), soybean oil, pork, eggs, apples, Chinese on data of the provincial administrative evaluation is based on the data of the cabbage, mustard, greens and other areas each city is affiliated to. provincial administrative areas that everyday food items as examples to each city is affiliated to. observe food pricing in the cities. The Logistics efficiency data is sourced from the China Price This variable reviews the logistics Fiscal balance Information Network. efficiency of each city by considering The ratio of local general budget commodity circulation, using the per revenue to local general budget Domestic services prices capita volume of freight and per capita expenditure is used to measure fiscal This variable primarily reviews the volume of express delivery business. balance. The data source is the National prices of four daily life services of every The efficiency of logistics reflects a city’s Bureau of Statistics. city, covering residential property basic conditions and overall standards service, residential electricity, natural of transportation, information and Reliance on foreign trade gas and monthly cable (digital) TV communication, as well as warehouse Using the ratio of total import and charges. The data is sourced from the facilities. Data is sourced from the export volume to regional GDP, this China Price Information Network. statistical yearbooks and bulletins of variable indicates foreign trade every city in 2017 as well as the State dependence, reflecting the impact of X. Ease of doing business Post Bureau. foreign trade activities on economic development in each city. Data is Convenience for Capital market engagement sourced from the National Bureau of entrepreneurship This variable uses performance to Statistics. evaluate the financial competitiveness This variable adopts the growth of of each city’s financial services industry, non-state-owned enterprises, using the strength of financial institutions, and number of non-state-owned public size of financial market. Data is sourced companies, to measure the from the ninth edition of China’s entrepreneurial environment in each Financial Centre Index (CDI CFCI) city. Data is sourced from Wind. Report. Labour disputes Business operation risks This variable takes the number of labour The non-performing loan ratios of disputes accepted by relevant commercial banks are used to measure authorities for every 10,000 job holders. potential business operation risks in The source of data is the China Labour each city. Data is sourced from the 2016 Statistical Yearbook 2016. As the Annual Report of the China Banking Yearbook only discloses the data of Regulatory Commission. As the Report provincial administrative areas only discloses the data of provincial

43 PwC Acknowledgements

PwC China Senior Advisor Xiaofeng Cai provided guidance on this report. The following individuals and groups in PwC and China Development Research Foundation contributed to the production of this report.

Advisory group

Qingwen Xiao Frank Lyn Deputy Secretary General, China Development Research PwC Mainland China & Hong Kong Markets Leader Foundation Thomas Leung Jiantuo Yu PwC Mainland China & Hong Kong Deputy Markets Leader Assistant to Secretary General and Director of Research Department I, China Development Research Foundation Daniel Li PwC China Assurance Leader

Xing Zhou PwC China Beijing Office Lead Partner

Elton Huang PwC China Shanghai Office Lead Partner

Jun Jin PwC China Strategy Consulting Partner

Jim Chen PwC China SOEs Leader

Research team Project management Kelly Lu (PwC) Echo Chen (PwC) Jenny Ji (PwC) Faye Ji (PwC) Lan Lan (PwC) Chris Li (PwC) Shan Liang (PwC) Xue Wang (China Development Research Foundation) Chunchun Chen(China Development Design Research Foundation) Shawn Zhang (PwC) Project consultant Ran Zhang (PwC) Jenny Guan (Institute for Tourism Studies, Macau; City Development Cover: Hangzhou Research Association (Macau) (start-up)) Data support Della You (PwC)

Chinese Cities of Opportunity 2018 44 For further information

In recent years, PwC has been closely monitoring development opportunities and urbanisation progress in Chinese cities and has formed a scientific and systematic methodology for assessing urban and regional advancement through multi-level theoretical exploration and the accumulation of practical overseas and domestic experience. We hope this assessment system will provide cities with a clear picture of their respective development characteristics and core competitiveness so they can form reasonable strategic positioning and direction for progress, as well as a basis for scientific research. Please contact us if you wish to understand the assessment system and research methodology or the benchmarking of specific cities.

Urban Development Research Team

Jun Jin Carrie Zhang Kelly Lu Partner, Strategy Consulting Senior Manager, Strategy Consulting Manager, Strategy Consulting PwC China PwC China PwC China +86 (10) 6533 2977 +86 (10) 6533 7569 +86 (10) 6533 7253 [email protected] [email protected] [email protected]

For further information on cooperation, please contact:

Echo Chen Director, Marketing and Communications PwC China +86 (10) 6533 8700 [email protected]

For enquiries about the research methodology, please contact:

Lan Lan Manager, Marketing and Communications PwC China +86 (10) 6533 8759 [email protected]

For media enquiries, please contact:

Vivian Huang Deputy Manager, Marketing and Communications PwC China +86 (10) 6533 8198 [email protected]

45 PwC Flying by Alix Zhang The sculpture was designed for the host city of the Beijing/Zhangjiakou 2022 Winter Olympics. It stands in the Banyue Cultural Square in Chongli, Zhangjiakou.

Chinese Cities of Opportunity 2018 46 www.pwccn.com This content is for general information purposes only, and should not be used as a substitute for consultation with professional advisors. © 2018 PwC. All rights reserved. PwC refers to the China member firm, and may sometimes refer to the PwC network. Each member firm is a separate legal entity. Please see www.pwc.com/structure for further details.CN-20180314-9