Fascinating piece about how China’s “economic bust” is really an economic transition—a bust in first-tier cities (Beijing, Shanghai, Shenzhen) and a boom in lower tier cities.
Interestingly enough, this is precisely what Beijing has planned all along. By restricting migration, the hukou system was designed to prevent overcrowding in first-tier cities and stop brain drain from lower tier cities. This would avoid a country of a few superstar cities and large, underdeveloped, "flyover" provinces that could be hotbeds for social unrest.
Now, educated professionals living in first tier cities are moving to lower-tier cities, bringing along their talents and energy, and revitalizing the rest of China. What a great development.
I'm now overseeing a factory being built in Leizhou 雷州, a "small" city with 1.3 million people located in West Guangdong粤西. When I'm there I live in a village, near a small town called Shentang沈塘. In the town you can see trackers and pickups from decades ago, some even with 86-style plate (which was abandoned in 1994). I felt like walking in the 90s, just few modern elements (QR codes) giving it away.
It's a shocking experience, as I spent past decade and half in the US and in Shanghai, thought my hometown, a province capital with 3-5 million people was lagged behind.
The place is morphing fast though. The village's young are looking forward to the factories moving in. They are happy to find jobs in their home: many had to go East Guangdong before.
There were only one McDonalds, one Luckin coffee in Leizhou a years ago, and now there are two McDonalds, two Luckin Coffee, and a Starbucks.
Just imagine what would happen when thousands of places like Leizhou picking up a better life.
Thanks for your message. But now, think about the growth potential. I grew up in a small German city with just 80,000 people—yes, you heard that right, 8万! There’s one McDonald’s and several Starbucks. Huge untapped potential!
Thank you very much for your effort and perspective. It is really helpful (and entertaining) to read your nuanced comments. Particularly as I get bombarded with all these China-doom stories.
Fascinating piece about how China’s “economic bust” is really an economic transition—a bust in first-tier cities (Beijing, Shanghai, Shenzhen) and a boom in lower tier cities.
Interestingly enough, this is precisely what Beijing has planned all along. By restricting migration, the hukou system was designed to prevent overcrowding in first-tier cities and stop brain drain from lower tier cities. This would avoid a country of a few superstar cities and large, underdeveloped, "flyover" provinces that could be hotbeds for social unrest.
Now, educated professionals living in first tier cities are moving to lower-tier cities, bringing along their talents and energy, and revitalizing the rest of China. What a great development.
I'm now overseeing a factory being built in Leizhou 雷州, a "small" city with 1.3 million people located in West Guangdong粤西. When I'm there I live in a village, near a small town called Shentang沈塘. In the town you can see trackers and pickups from decades ago, some even with 86-style plate (which was abandoned in 1994). I felt like walking in the 90s, just few modern elements (QR codes) giving it away.
It's a shocking experience, as I spent past decade and half in the US and in Shanghai, thought my hometown, a province capital with 3-5 million people was lagged behind.
The place is morphing fast though. The village's young are looking forward to the factories moving in. They are happy to find jobs in their home: many had to go East Guangdong before.
There were only one McDonalds, one Luckin coffee in Leizhou a years ago, and now there are two McDonalds, two Luckin Coffee, and a Starbucks.
Just imagine what would happen when thousands of places like Leizhou picking up a better life.
Thanks for your message. But now, think about the growth potential. I grew up in a small German city with just 80,000 people—yes, you heard that right, 8万! There’s one McDonald’s and several Starbucks. Huge untapped potential!
Congratulations on your 50th article anniversary. I always read your posts.
Thanks a lot! I appreciate it!
Great nuance. The McKinsey table in the end was characteristically convoluted yet insightful.
You're definitely onto something.
Been doing more research on this and here's an interesting stat:
下沉市场的社零消费占比近2/3。一般情况下，一、二线城市居民收入高、消费支出也高，往往给人一、二线城市总消费占比也很高的错觉。实际上，以我们对下沉市场和头部市场的划分方式来看，疫情前的2011-2019年，头部消费市场的社零份额略超40%，但经过疫情后，头部市场已经不及40%，社零份额正向着下沉市场倾斜。截至2023年，下沉市场社零份额已经超过60%，这显示头部市场的消费占比并不如大家想象的那样高，而占比更高的下沉消费市场可能更为重要。
https://wallstreetcn.com/articles/3727334
Thank you very much for your effort and perspective. It is really helpful (and entertaining) to read your nuanced comments. Particularly as I get bombarded with all these China-doom stories.
Congrats on #50!
Thanks!