BEIJING: Brand owners hoping to enhance their position in China should target a select group of up-and-coming cities, a report has argued.

Research firm The Economist Intelligence Unit estimated the Chinese urban population could reach 880m people by 2037.

"The pace of urbanisation in China will have a fundamental effect on all businesses," the EIU said. "China is still a developing market. Urbanisation does more than just drive growth; it also makes it more stable."

Guangzhou, Wenzhou, Shanghai and Suzhou currently constitute the primary consumer markets, but other cities are quickly gaining ground.

To identify the new generation of leading municipalities, the EIU analysed 86 prefectures boasting at least 1m inhabitants, choosing 20 it believed might form a base for expansion.

These outlets - collectively termed CHAMPS - were spread throughout the country, and included Baotou, Shenyang, Wuhu, Hohhot, Xiamen, Wuhan, Nanchang and Xuzhou.

During the next decade, these urban centres will grow by 27% to 85m people, in which time the 20 wealthiest cities should swell by 19% and hit 100m.

"The richest cities will still be important but they are already crowded markets," the EIU suggested. "The best growth opportunities for products targeted at high-income earners will in most cases be in the inland cities."

In 2009, the median salary among residents of the 20 most affluent metropolitan hubs was 42% greater than their rapidly-developing peers, a gap falling to 15% by 2020.

Annual earnings now stand at approximately 17,000 yuan ($2,558; €1,870; £1,588) across the latter group of conurbations, potentially surpassing 30,000 yuan by 2018.

Average income may also expand to 57,000 yuan by 2020, measured against 65,000 yuan in the 20 richest areas.

"Since CHAMPS consumers tend to be at different income levels from their wealthier counterparts, the types of goods they purchase tend to differ," the EIU said.

"For instance, every household in Shanghai has, on average, 1.1 PCs, while in Chongqing that number is only 0.6 ... Thus the CHAMPS have plenty of scope for rapid growth in household penetration rates."

By 2013, there will be an additional 2.3m mobile phones in the 20 emerging cities per year, 1.8m more personal computers, 1.6m extra TV sets and 700,000 more private cars.

Another benefit of prioritising these markets is that they broadly represent China's urban population as a whole, thus offering transferable learnings.

Within its overall selection, the EIU earmarked six sites which could be particularly advantageous for companies to focus on.

Heifei was named as the top-ranked prospect, boosted by impressive levels of disposable expenditure, relatively low living costs and sizeable government investment.

Maanshan and Chongqing, both on the Yangtze River, provide low transport costs, while Shenyang, Anshan and Pingdingshan have heavy industry capabilities alongside attracting major resources from the government.

"Most tend to be fuelled by construction booms, with rising home ownership closely linked to spending on appliances and cars," the EIU said.

The fact several Chinese cities are becoming increasingly interconnected is a further issue to consider when planning for the future.

For example, Guangzhou, Shenzzhen, Dongguan and Foshan are forming the "Pearl River Delta City", which will yield a combined population of 31.2m by the mid-2030s.

Similarly, Beijing and Tianjin, merging into a joint entity colloquially known as Jingjin, should house 31.1m people, while the "Yangtze River Delta City", comprising Shanghai and Suzhou, contains 14.8m citizens.

Data sourced from the Economist Intelligence Unit; additional content by Warc staff