If urban development can be used as a measure of economic strength, China’s urbanisation could be a cause for concern to its economic rivals. Look at cities with a population over one million: America has nine; Europe has 36; China has just short of 100. But, ask a Western businessperson to list just five of China’s 660 cities, other than Beijing and Shanghai, and they will probably struggle to produce more than a couple of names.

Many of China’s cities are already economically significant on an international scale. Take Shenzhen for example, a city of over eight million people just across the border from Hong Kong. Thirty years ago, this former fishing town was chosen by Deng Xiaoping to be China’s first Special Economic Zone, which opened it up to trade with the outside world. Now it is China’s largest manufacturing centre, it has the country’s second largest port, and is home to two stock exchanges. Further inland there is Chongqing, which, with a population of over 30 million, is the world’s largest municipality. This giant industrial furnace receives €15.8bn (CNY177bn) in revenue from the automobile industry alone, and it also has comparably strong industries in steel and shipbuilding. And, as the biggest inland river port in western China, it is ideally situated to transport goods to the east for export.

These cities, despite their size, have failed to capture any of the limelight from Shanghai and Beijing, but it is easy to see their international importance: Shenzhen has the world’s fourth busiest port and Chongqing has Asia’s biggest aluminium plant. But these are just two of many rapidly developing Chinese cities.

INVESTMENT DRIVES
These new cities will all grow into places with their own economic identity, dependent on a wide range of factors, such as geography, natural resources, and the qualities of the local population. However, among this diversity they are all modernising in a way that will attract the kind of foreign investment that has accelerated growth in Shanghai, Beijing and Shenzhen. This means strong investment in both the hard and soft infrastructure needed to create an environment attractive to a foreign business.

On the hard side it is ensuring there is sufficient energy to power factories, and enough roads and railway lines to get the end product from A to B. Regarding soft infrastructure, Kenny Ho, head of research at Jones Lang Lasalle Shanghai, believes much of it should be supplied by city or provincial governments – not only must there be enough professional services in an area, but local government must also offer a degree of transparency and be receptive to working with foreign companies. “It is better to do business in a city that takes the lead when it comes to solving problems, instead of just kicking you round the departments,” he says. “This helps lower the perceived level of risk.”

Potential communication problems – linguistic and cultural – need to be avoided too. The city of Chengdu employs 14 people, all of whom speak English and have lived abroad, solely to liaise with foreign companies. “They are very easy people to deal with, and if I were green to China, their experience in working with foreign companies in English allows for a much softer entry,” says Richard Brubaker, managing director of China Strategic Development Partners, a firm helping foreign businesses land in the remoter parts of China.

Local governments, which have a whole host of powers autonomous from the central government, also offer incentives to bring in investment, which often take the form of tax breaks or land deals. “There is definitely a pattern that the further you go inland, the more hungry cities are for development, and this will increase the likelihood that companies will receive these kinds of benefits. Go far enough, and a company might be offered land for free, but they may well not take it because it might be missing some important infrastructure, like power lines!” says Brubaker.

The zones where the government focuses foreign investment are crucial for a city’s development; and when an economic zone is successful, it can help change the face of a city. Tianjin, a giant port city close to Beijing, pulled in €3.87bn in 2007 in foreign investment as a result of the Tianjin Economic- Technological and Development Area (TEDA). There are already 62 Fortune 500 companies with operations in TEDA and it is the money and technology that foreign companies provide that is helping to propel Tianjin into the first rank of Chinese cities.