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The Third- and Fourth-Tier Cities That You Don’t Care About Are Actually a Trillion-Yuan Market Full of Opportunities
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The Third- and Fourth-Tier Cities That You Don’t Care About Are Actually a Trillion-Yuan Market Full of Opportunities

Cai Wenjuan and Luo Anyang
FreeS Fund, 2017
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Editorial Rating

8

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  • Analytical
  • Applicable
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Recommendation

China categorizes its cities into tiers based on population, GDP, political administration, and other factors. Beijing, Shanghai, Guangzhou and Shenzhen are first-tier cities; cities like Hangzhou and Chengdu, for example, fall into the second tier. When it comes to consumption and spending power, most marketers primarily consider the bustling metropolises while forgetting the rest of the country. This article by bloggers Cai Wenjuan and Luo Anyang – edited by the research team of venture capital firm FreeS Fund for its own blog Free Thinking – shines a light on the fast-growing economies of third- and fourth-tier cities. The data do seem to support the conclusion that these cities represent significant opportunities, but the article doesn’t fully explain all the correlations and causations it claims exist. Nonetheless, getAbstract recommends this analysis to economists, business strategists and people looking for the next big moneymaker in the Chinese market.

Summary

Statistics from comScore, Nielsen, McKinsey, TF Securities and China’s National Census Bureau show a trend that most people might find surprising: Young people living in China’s smaller cities – the “small-town youths” – may very well have more disposable income and greater spending power than young white-collar professionals living in first- and second-tier metropolises. The small-town youths are becoming an increasingly powerful and influential consumer demographic.

Small-town youths are generally between 25 and 35 years old. They tend to live in relatively modernized and economically sound third-tier cities, from where they can usually reach a large metropolis in two or three hours by express train. Most have at least a college degree. They procured jobs in their hometowns (often via family connections) and have no ambitions to pursue cutthroat careers in the big cities. Since housing prices are much lower in these smaller cities, ...

About the Authors

FreeS Fund is a venture capital firm that provides both early- and growth-stage investment to tech start-ups. Its research team edited an article published by writers Cai Wenjuan and Luo Anyang for subsequent publication on FreeS’s Free Thinking blog.

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