Small Cities Emerge as New Growth Drivers

stage of high-quality growth, consumption is playing an increasingly important role amid the pressure of an economic growth downturn.

“To bolster consumption, more efforts are needed to increase residents’ incomes and expand the scale of middle-income consumers,” Shen Jianguang, Vice President and chief economist at JD Digits, said.

Shen called for the primary and secondary distribution of incomes to be improved via multiple channels and a diversified tax adjustment mechanism. “We should also enhance consumers’ acceptance of credit products in counties,” he added. The percapita disposable income of rural residents continued to grow at a faster pace than that of urban dwellers in the first three quarters of 2019, according to the National Bureau of Statistics.

“We expect consumption in lower-tier cities to surge from $2.3 trillion in 2017 to $6.9 trillion in 2030,” said Robin Xing, Morgan Stanley’s chief China economist, in a research note. “These smaller cities could be the engine driving China’s overall private consumption market of $11.8 trillion over the same period.” Xu Feifei, associate partner at global consultancy Prophet, said while lowertier cities have been less brand-conscious and placed more importance on economic value, rising disposable income and diversification of spending behavior will slowly change that.

Xu added that brands, hoping for increased demand for high-quality goods and premium services, are establishing their presence early in burgeoning markets even before they fully mature to capture their potential.

Statistics from global data analytics company Nielsen show there are 953 million people living in third-tier cities and below, far surpassing the 427 million in first- and second-tier cities. It also shows that smaller cities have huge untapped consumption potential.

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