The East rises: Chinese cities quickly becoming global hubs

Fans of New York and San Francisco know why those cities are routinely sought out by global companies: They seem to have it all, from vibrant local economies to great arts and culture scenes to hordes of talented, young professionals.

So perhaps it’s no surprise that these cities took the top spots in the eighth annual A.T. Kearney Global Cities Report. Comprised of the Global Cities Index and Outlook, the study measures cities’ current competitiveness and future potential, respectively.

{mosads}The other top cities in the rankings also represent what most consider traditional global centers: London, Paris, and Tokyo to name a few.

But within the report, the rapid rise of Chinese cities as global powerhouses should give CEOs of global national corporations, city planners, policymakers and government officials everywhere pause.

Not only did the number of Chinese cities included in the report jump significantly over the past decade, but these East Asian metropolises also outperformed nearly every other region we covered.

It’s true that places such as Ningbo, Foshan or Wuxi may never fully unseat the Big Apple or Bay Area in the top city rankings.

However, when it comes to attracting corporate investment, high-growth companies and global talent, China’s well-known and lesser-known mega-cities have dramatically upped their game — and those that want to compete with them would do well to pay attention.

The East rises

The number of Chinese cities included in the Global Cities Index jumped from seven to 27 since 2008, while the Global Cities Outlook added six Chinese cities over the past three years. The increased volume is impressive, but even more so is the cities’ performance.

Over the past 10 years, the Chinese cities included in our first Global Cities Index witnessed greater score growth than all other regions except Africa. In the Outlook, China’s score growth outpaced every other region over the past four years.

This improvement is no accident. Several factors have helped propel Chinese cities into the rankings and the global fray. Most significantly are the coordinated urban transformation strategies between national, regional and municipal entities to improve the business, cultural and social aspects of China’s most populated areas.

The leaders focus their investment plans on the metrics that matter, such as the pipeline of tech talent, the time it takes to start a business and the availability of cultural activities.

They then implement programs aimed at improving their key metrics. The Global Cities report, for instance, highlights initiatives that reduced the bureaucracy around launching businesses, increased the number of museums and supported the growing number of Chinese students studying abroad.

Such efforts not only improve the business environment and quality of life in these growing urban areas, but they also help attract foreign investment. China has been a top recipient of foreign direct investment for the past five years, according to the A.T. Kearney FDI Confidence Index.

The growing Chinese middle class adds fuel to the fire, facilitating foreign corporate interest in these rising cities. Chinese consumers will account for 8 percent of total private consumption by 2021, and global brands are taking note.

Walmart recently opened a store in Shenzhen and Starbucks has 3,200 locations in mainland China with plans to grow. The takeaway: These smart cities offer a complete package for corporate investment that includes business-friendly environments, attractive places to live and play and increasingly, a strong local market for their products that unlocks new consumer segments.

Lessons for the rest

For CEOs and governments all over the globe, the growing influence of Chinese cities provides both a playbook and a bit a warning: Maintain focus on your city’s competitiveness or you may lose a piece of the corporate investment pie. Those interested in improving their own cities should keep two key lessons in mind.

First, empower cities to become great. Cities that have the opportunity to try new ways of facilitating business and foreign direct investment, growing talent or improving culture may develop new areas of strength that garner investment.

China, for instance, is experimenting with specialty cities that focus on specific activities and industries such as game development or pets. Some of the ideas are more risky than others to be sure, but there’s something to be learned from the underlying spirit of local innovation, reinvention and a forward-thinking mindset.

Second, economic prowess requires a holistic approach. The most impressive Chinese cities have adopted an end-to-end strategy for increasing competitiveness that accounts for all of the factors that go into a great city, from reduced pollution to growing start-up ecosystems to a vibrant arts scene to affordable housing.

Certainly, New York and San Francisco long ago cracked the code on what it takes to be a top city. But it doesn’t mean they are the only game in town, and the success story of Chinese cities reveals that it’s possible to envision and then transform existing cities into new urban global powerhouses.

Mike Hales is a partner in the operations practice with the global management consulting firm A.T. Kearney, and Nicole Dessibourg-Freer is a manager in the firm’s consumer products and retail practice. Both are co-authors of A.T. Kearney’s annual Global Cities Report and are based in Chicago.