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.
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.
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.
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.
Dividing China’s cities into different tiers has obvious advantages for your decision making,
This is one of the most effective ways to structure your China marketing strategy and tune it to suit the local conditions.
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.
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.
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 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 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 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.
Often lumped together, cities in those categories represent the majority of China’s urban population and combined income.
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.
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