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All You Need to Know about China City Tiers

ByChao Cheng|China Market Entry 101

May18

China city tier system is the first thing to understand before deciding your China market entry strategy.

You can follow my 7-Step Formula in Ultimate Guide to Finding Your Profitable Niche Market in China to uncover your profitable business opportunities in China.

From what cities to start your China business is a big concern in deciding your niche.

  • Case Study
  • Unbalanced China Market
  • China City Tiers Matter
  • Lacking Standardized Criteria
  • Typical Classification
    • 1st Tier
    • 2nd Tier
    • 3rd Tier
    • 4th and 5th Tier
  • Prioritize Your Target China Cities

 

People always came to me to consult where they should start.

And they often ask what China cities belong to tier 2, and what cities are under tier 3, and what are under tier 4.

I need to explain again and again and again since it is quite difficult to provide an absolutely accurate answer in a very short time.

But it’s quite interesting and it is important.

Let’s take a look at a real case first.

Case Study: Market Prioritization Analysis for a Global Medical Group

We have been helping quite a few overseas companies understand the China market with our China Market Research.

You can also benefit from the market prioritization analysis based on the specific business and local market situation.

53 major China cities were chosen for this report.


Buy the Case Study: Market Prioritization Analysis



 

Understand the Unbalanced China Market and Find Your Right Niche

China is developing really fast in the last 30 years, and numerous China cities have experienced unprecedented economic growth.

However, the whole Chinese market is quite unbalanced.

You know what I mean if you have been to at least 20 China cities, while some people understand this very soon, they only need to visit 2 or 3 places after my travel advice.

A classification system based on “tiers” emerges to rank cities throughout China, and it often cited by many business people.

Focus on China City Tiers Right for You

Dividing China’s cities into different tiers has obvious advantages for your decision making,

  • Different city tiers imply different consumer behaviors, income levels, and business opportunities.
  • It can illustrate how economic development is moving inland or westwards in China.
  • 2nd tier cities have become increasingly attractive to investors and represent some of the fastest growing areas.

This is one of the most effective ways to structure your China marketing strategy and tune it to suit the local conditions.

Lacking Standardized Criteria: Don’t Get Lost!

The idea seems simple and practical enough. Yet the snag of using the tiers system is in setting the exact parameters for them, because with so many different classifications being used, the result is confusing and contradictory.

To be honest, there are many versions of China City Tiers and none is official.

The use of China city tiers was started by the private sector and there is no definitive list.

Unlike almost every other Chinese economic indicator, the government doesn’t have an official definition for the tiers, even though all the governments, industry experts, and analysts are using the classification system.

Some banks, government offices and research houses label all provincial capitals as second-tier, while others draw their conclusions based on criteria such as population figures, gross domestic product, disposable income and housing sales.

SinoStep: All You Need to Know about China City Tiers

SinoStep: All You Need to Know about China City Tiers

A Typical Classification You Can Follow

For your reference, I am sharing a typical classification.

China has more than 600 cities, which are often categorized into four or five tiers based on different criteria.

Special administrative regions, Hong Kong and Macau, are not classified within the tier system at all.

Considering factors

  • their population size,
  • development of services,
  • infrastructure
  • cosmopolitan nature.

Tier 1 represents the most developed areas, while Tier 5 is less-developed small cities. Rural areas are villages close to Tiers 2, 3, 4, and 5 cities.

1st Tier

1st tier cities represent the most developed areas of the country with the most affluent and sophisticated consumers. They are also considered to be the center of main economic activity.

Industries that are evolved to become driving forces of Chinese economy tend to cluster around 1st tier cities as those locations have the biggest potential to attract foreign and domestic investments.

2nd Tier

2nd tier cities have become increasingly attractive to investors as well and represent some of the fastest growing areas.

Consumer behavior is evolving very fast in 2nd tier cities and, in general, tends to mimic 1st tier’s trends.

3rd Tier

3rd tier cities generally lag behind 1st and 2nd tier ones in terms of economic growth and development, although many of them are still considered to be very significant economically and historically.

Many of 3rd tier cities are considered to be convenient and relatively inexpensive locations for a number of large industries and big companies.

4th and 5th Tier

Often lumped together, cities in those categories represent the majority of China’s urban population and combined income.

Create Your Own Formula

Successful companies have their own criteria to classify the China cities into different tiers to match their marketing strategy.

Divide all China’s cities into tiers, and put forward your own clear formula.

We include market prioritization analysis in China market entry strategy.

About the Author

Chao is recommended by Paypal to bring overseas brands into the China market. Now he coaches business owners to start up and grow their business in China. Author of Sell Online To China, How to Build A Right Website That Works In China, and a series of China Business Guides.

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(5) comments

[…] western people are curious about the 5 tiers of China cities here when they first come to China, and will feel the huge differences when they travel across […]

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[…] differences between these second tier cities. These webpages from Jones Lang LaSalle and Sinostep shed further light on the tier classifications, with the former even including Tier 1.5 cities. […]

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[…] Shanxi, Hebei, Hunan, and Jiangxi, which is either Tier-3 or Tier-4 city that considered to be “economically less developed and spend less” than other large metropolises. Even more noteworthy is that Tibet exceeded […]

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Steve Williams May 10, 2017

Are there any company… small cap… that you recommend for investment….. that are going to grow to compete with Alibaba….email… commerce business……

Reply
    Chao Cheng June 9, 2017

    Could you please be more specific on your comment?

    Reply
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