Tag Archives: second-tier

Conspicuous Consumption “Here To Stay” In China: How Will Retailers Take Advantage?

Luxury Market In China A Mixed Bag For Foreign Brands, Who Fight To Get Customers To Buy Inside China Rather Than Traveling Overseas

Although Beijing and Shanghai are China's "crown jewels," second-tier cities like Chongqing may ultimately prove the engines for the creation of a more comprehensive Chinese consumer culture

Although Beijing and Shanghai are China's "crown jewels," second-tier cities like Chongqing may ultimately prove the engines for the creation of a more comprehensive Chinese consumer culture

We’ve discussed recent reports on the rebound of the Chinese luxury market (which didn’t drop that much to begin with, despite global economic woes), and this year’s findings in McKinsey & Company’s Insights China report that China is rocketing towards the top of the list of the world’s biggest luxury markets. Although China remains one of the only bright spots in the world of luxury retailing at the moment, foreign luxury brands — despite rapid growth in the mainland market — often have difficulties convincing many of the country’s highest-potential customers (the wealthy and super-rich urbanites in top-tier cities) to buy their products within the mainland, strangely enough, because of the large luxury tax China levies on high-priced imported goods.

Possibly to combat this problem, as we’ve seen this year, many companies are looking towards second- and third-tier cities as a source of future growth, and perhaps leaving the top-tier cities alone and letting their Beijing or Shanghai boutiques function only as “showrooms” for ultra-rich customers who’ll simply buy the products on their next overseas or Hong Kong/Macau trip. In these smaller urban areas, middle- and upper-middle class customers, who still want to differentiate themselves through conspicuous consumption but are most certainly not part of the economic elite, could be the key for luxury brands who want their China locations to actually sell things rather than simply show them off like a real-life catalog. Middle- and upper-middle class urban professionals in cities like Xi’an, Qingdao, Nanjing and Chongqing — who make a decent living but can’t afford to fly to Hong Kong or Macau (let alone Paris or Tokyo) for luxury shopping sprees — are likely going to buoy luxury brands’ losses in top coastal cities.

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Bombardier Awarded Contract For 80 “Super High Speed” Trains In China

Implications For Second- And Third-Tier Cities, Consumers Immense As High Speed Rail Set To Increase Connectivity

Bombardier's ZEFIRO technology features maximum operating speeds of 380 kph (Image courtesy Bombardier)

Bombardier's ZEFIRO technology features maximum operating speeds of 380 kph (Image courtesy Bombardier)

China’s already extensive, but in some places aging, rail system has benefitted greatly from the government’s massive stimulus spending over the last twelve months. Earlier this year, the New York Times noted that the Chinese stimulus plan — which targeted, among other infrastructure projects, highways and railroads — could likely be a key part of the development of China’s interior cities, many of which have yet to reap the same benefits of the country’s economic growth as their much larger, east-coast counterparts like Shanghai:

The [Chinese] stimulus plan, one of the world’s largest, promises to carry the modernity of China’s coasts deep into the hinterlands, buying the kind of great leap forward it took the United States decades — and a world war — to build, and priming China for a new level of global competition.

China will spend $88 billion constructing intercity rail lines, the highest priority in the plan. It spent $44 billion last year and just $12 billion as recently as 2004, said John Scales, the transport coordinator for China at the World Bank.

As 2009 nears its end, China’s investment in rail infrastructure has not slowed, and in fact remains relatively sustained, due to the size both of the stimulus package and the country itself. Recently, Bombardier Sifang — Bombardier’s Chinese joint venture — nabbed an enviable contract to sell 80 “super high speed” trains to China, a contract worth an estimated US$4 billion (27.4 billion yuan). From China Daily:

CSR Bombardier Sifang (Qingdao) Transportation Ltd, a joint venture of Canadian train maker Bombardier and CSR Sifang Locomotive and Rolling Stock Ltd, signed a 27.4 billion yuan contract with the Shanghai Railway Bureau, under which the company will build 80 high-speed trains.

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Architecture & Design Firm Bets On China’s Second- And Third-Tier Cities

American Firm Callison, With More Than 1.4 Million Square Meters Of Space Under Construction, Sees Sustained Urban Growth

Hangzhou's MixC is one of southeast China's most striking architectural complexes

Hangzhou's MIXc is one of southeast China's most striking architectural complexes

The Seattle-based architectural and retail design firm Callison announced today that it plans to leverage its nearly 20 years of experience in the Chinese market to direct more in-country staff and resources to its already-intensive China efforts. As we’ve written before, many observers think China’s future will depend on its second- and third-tier cities rather than the traditional business and cultural centers of Shanghai and Beijing, and Callison is looking to be one of the biggest players in the development of these large, but still underdeveloped, cities.

According to a company press release, the firm has put China high on its global list of priorities. The firm’s former CEO and current Principal, Bill Karst, is currently based in China, and the firm has more than 1.4 million square meters of space under construction, including The MIXc luxury shopping complex in Hangzhou  and 24 City in Chengdu, both of which are being developed by China Resources. As the release goes on to point out, Callison is uniquely positioned in terms of major foreign architecture and design firms in China, as it has been in the market since 1991 — giving it rare insight into the workings and particularities of the Chinese market:

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The Rise Of China’s Megacities: Good For Business?

Six Cities – Tianjin, Guangzhou, Shenzhen, Chongqing, Chengdu and Wuhan – Expected To Join The “Megacity” Ranks, With Real Urban Populations Exceeding 10 Million, In Next 15 Years

Six cities should join the ranks of "megacities" like Beijing and Shanghai in the next 15 years. Who will cash in on the new opportunities that will arise?

Six cities should join the ranks of "megacities" like Beijing and Shanghai in the next 15 years. Who will cash in on the new opportunities that will arise?

One of the greatest engines of China’s rapid economic growth has undoubtedly been the massive in-migration of the rural population into the wealthy coastal area. Although this influx has slowed, and even reversed somewhat, as a result of the global economic slowdown, for China’s major cities, its cosmopolitan centers, urban population growth is expected to continue growing for at least the next 10-15 years. As China’s top-tier cities, Beijing and Shanghai, become even more competitive and second- and third-tier cities present young professionals with better job options, the rank of Chinese “megacities” — cities with populations exceeding 10 million — are expected to be joined by six cities: Tianjin, Guangzhou, Shenzhen, Chongqing, Chengdu and Wuhan. According to a post today on FT’s Dragonbeat blog, the rise of the new Chinese megacity will present new challenges for urban planners. However, I think they will also present unique opportunities.

Tom Miller writes for the Financial Times:

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