Supersized citiesChina’s 13 megalopolises

Economist Intelligence UnitJuly 2012

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Today’s Presenters

Liu QianDeputy Director, China Forecasting Services

Economist Intelligence Unit

Duncan Innes-KerRegional Editor

Economist Intelligence Unit

4

Access China

Analysis Analysis of regional trends in China 31 provinces + 287 prefectures

Data National Bureau of Statistics Data cleaning

Forecasts State-of-the-art econometric framework—dynamic time

series Out to 2020

China’s growth prospects

• 2012 has been rockier than anticipated

• But longer-term fundamentals remain the same

• China’s development still has far to go—watch the regional story

The rise of the Chinese megalopolis

How many millions?

• What is a megalopolis? Megacity or megacity grouping with

metropolitan population over 10m Part of broader government moves to

integrate larger urban areas to achieve economies of scale

Also results from spread of economic growth inland

• Why does it matter? One-third of the urban population will live in

one of these megalopolises by 2020 In most of them the majority of their

populations will reach middle-class status

How many millions?

• First three megalopolises are well known

• Richer, and continued draw for the educated

• Will continue to see population growth faster than the national average in 2010-20.

From three..

….to thirteen.

• The seven emerging in this decade (2010-20) will be poorer and younger

• Driven by intra-provincial migration…

• …which is in turn driven by improving local economic opportunities

The young and the restless

• Migrants are young

• But the megalopolises are starting to mature rapidly

The young and the restless

• Not all the megalopolises will develop, and therefore age, in the same way.

From zero to 50

• Wider development of the middle class is central to China’s consumption story

• Urban disposable income of Rmb30,000 (nearly US$5,000) used as benchmark

• Megalopolises that emerged earlier are reaching the point where more than 50% of their populations are middle-class earners…

From zero to 50

• …but not all the megalopolises will hit the 50% mark by 2020.

Incomes? Shades of grey

• Income tends to be understated in official household surveys.

• EIU’s estimates show large discrepancy.

• Official figures say 12% of Chinese households earned more than Rmb80,000 a year in 2010.

• When adjusted for grey incomes, this reaches 32%.

Impact on business

Education

• Megalopolises provide weak access to education in comparison with smaller cities

• Population growth outstripped the rise in the number of schools and teachers needed to educate them

• Southern China clusters fare particularly poorly

People’s Daily Online

Retail—the case of Chengdu

• Regional shopping centre for the wealthy in neighbouring provinces

• Local government has set a goal of bringing 20 top international brands to the city every year in the period up to 2015

• City’s entertainment offerings to expand

People’s Daily Online

Healthcare

• Strain set to increase significantly Range of resources

needed to treat ailments associated with urban living

Several of the megalopolises are already starting to age

They are not yet fully equipped to care for the population boom

Not all of them have the same health needs

Xinhua

What next?

What to watch out for

• The rise of China’s megalopolises is sustainable, but subject to risks

• Mismanagement of hukou reform

• Energy and water supplies

• Financial capacity of local governments

• Social unrest

• But these urban agglomerations will be central drivers in China’s rebalancing towards consumption

What next?

Questions?

EIU reports on China

• Download our free report on China’s megalopolises: http://www.eiu.com/megalopolis

• You can also download other recent white papers from the EIU by visiting the Special Reports section on our website:

http://www.eiu.com/landing/special_reports

Thank you.

Contact for more information:

Coralie ThomsonSenior Marketing ManagerEconomist Intelligence Unitcoraliethomson@economist.com+852 2585 3839