There has been an incredible growth in China´s cities, with Beijing, Shanghai, Guangzhou and Shenzhen remaining common points of market entry for foreign businesses due to the fact that these megacities offer various competitive advantages.
Under China´s administrative classifications, one may classify various types of cities: provincial status cities, sub-provincial cities, provincial capitals and prefectural cities. However, it must be noted that these administrative classifications do not always adequately reflect the characteristics of the consumer market in these areas.
Assessing a city´s potential as a consumer market solely on the basis of its administrative level may result problematic considering many cities owe its differences in economic development, location, living standards, urbanization rate, as well as population growth. Hence, a variety of methods have been applied to categorize China´s cities into groupings or “Tiers”.
Beijing, Shanghai, Guangzhou and Shenzhen are all classified as being tier 1 cities, and choosing the best possible new location in China´s Tier 2, 3, and 4 cities may often times result rather challenging. However, it is important to realize that due to the rapid urban expansion that is occurring within and around hundreds of China´s cities, it is not a requirement to locate your business in a Tier 1 city.