While investors are anxiously looking at the current economic slowdown in China and the related stock market volatility, they are probably missing the bigger picture. There is little reason to believe that China’s growth dynamics will reverse, they are just shifting down a gear to a slower, healthier pace. Global economic gravity keeps moving eastwards rapidly and mainly into China’s urban powerhouses which remain at the heart of a radical shift.
The outcome of a study undertaken by Oxford Economics a while back, which looked into future trends and market opportunities in the world’s largest 750 cities, is still unchallenged. The results remain astounding as they show how fast the economic global economic focus in fact keeps shifting towards China. While, until 2030, the study predicts that eight European cities will drop out of the global top 50 cities by GDP growth by 2030, nine new Chinese cities will join that group, taking the Chinese total to 17. This is more than North America and four times more than Europe. And no fewer than seven of the top ten cities will be in China. The five largest GDP growth contributors among them are Shanghai, Tianjin, Beijing, Guangzhou and Shenzhen, which alone will experience combined GDP growth of almost $3tr in the period until 2030, and others — whose names are probably still mostly unfamiliar in the West although a number of them are home to some of the tallest skyscrapers in the world — such as Chongqing, Suzhou, Jiangsu, Foshan, Shenyang, Wuhan or Qingdao, will add another $2tr or more to this figure. This means that, in economic terms, those cities will become as prominent as other urban conglomerates such as Tokyo, Seoul, Houston or Sao Paulo are today. The Pearl River Delta in China’s south alone, tiling eleven big cities, including Hong Kong, to a mega-urban conglomerate, in 2014 had combined GDP of over $800bn, more than Turkey or Saudi Arabia, and a 57mn-population, more than Canada, Argentina or Australia.
“Driven by burgeoning urban populations and rapid labour productivity growth, this handful of huge Chinese cities is just the tip of the iceberg,” the study says, adding that the aggregate GDP of China’s largest 150 cities should have overtaken Europe’s 139 largest cities already by 2015 and will outpace North America’s largest 58 cities by 2022.
In fact, in the top 50 list of urban GDP growth and apart from London, there are only two more European cities left – Istanbul and Moscow. No Middle Eastern city made it in the top 50.
Despite global concerns about China’s economy, the study predicts exactly the opposite. Linked directly to the growth projections, change in Chinese urban household incomes by 2030 will be twice as large as the change for North American cities in US dollar terms, and more than six times the change in Latin American cities, for example. In percentage growth rate terms, Chinese urban incomes will grow six times faster than European urban incomes, the study says. In terms of consumer trends, the study found that the number of high-income Chinese consumers is set to leap ahead dramatically over the next years. Starting from a comparatively low average base today, China will boast some 45mn urban households in 2030 with annual incomes in excess of $70,000, putting it well ahead of Europe and hot on the heels of North America.
Shanghai alone will jump from a rank of 69 today to rank eight for the number of its high-income households in 2030, the study says. Mainland China’s undisputed role as the economic pulse of Asia will also have an effect on other urban conglomerates in the region. About the fastest GDP growth in the world until 2030 will be reached by Tokyo, Jakarta, Singapore, Bangkok and Hong Kong. Interestingly, Mumbai, the only Indian city in the top 50 list, ranks just 48, and its growth dynamics are seen to be behind much smaller cities such as Seattle or Perth.