"Megalopolises" promise growth in China

BEIJING: Brand owners seeking to secure future growth in China could benefit from targeting the country's emerging "megalopolises", a range of huge urban centres presenting considerable opportunities.

According to the Economist Intelligence Unit, the research firm, there will be 13 "megalopolises", either individual cities or sprawling clusters, by 2020, all located in western and central areas.

By this date, the largest such hub will be Greater Beijing, comprising the capital and Tianjin, and set to house 28.7bn people. The Shandong Peninsula, encompassing nine cities, should contain 21.6m.

Greater Shanghai, unifying this city and Suzhou, will boast 18.2m, ahead of Shenzhen's 14.2m, and several other sites, like Greater Zhengzhou, Greater Guangzhou and Chengdu, are due to surpass the 11m-mark.

Among the wider forces shaping this trend is urbanisation, with 58% of China's population living in cities by 2020, including 32% in the "megalopolises" identified by the analysis.

"Each of China's 13 megalopolises represents a potential market the size of a small country," the study said. "While impressive, the considerable variation in demographic composition, overall income levels and degrees of retail development present a significant challenge for investors as well."

"All of the new megalopolises that will emerge in the years to 2020 will be in inland China, where most of the new transport and logistics infrastructure was only put in place in the past ten years or so. Those seeking to cater to the consumer classes ... will need to take such distinctions - and the need for regional substrategies into consideration."

As an example, the number of individuals in the middle class - namely, with a salary of at least RMB30,000 per year - is anticipated to peak at 70% in Greater Shanghai, followed by Greater Beijing and Greater Xi'an on 69%.

By contrast, estimates for Greater Shenyang stand at 45%, climbing to 50% in Chongqing and 60% in Chang-Zhu-Tan, which is made up of Changsha, Zhuzhou and Xiangtan.

When factoring in the "grey income" of unofficial earnings for 2010, however, the report revealed the amount of middle class households rose from 12% to 32%, suggesting future projections may be stronger still.

The aging population will also become a key constituency for marketers, as this demographic will yield 17.4% of people living in Shenyang by the end of the decade and 17.1% in Greater Shanghai. Totals should fall to 11-13% elsewhere.

"Compared with the national average, the megacity clusters will continue to maintain a relatively large proportion of working-age residents - all well above the national average of 70%," the study added.

Data sourced from Economist Intelligence Unit; additional content by Warc staff, 11 July 2012

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