Although Hong Kong, Macau and top-tier mainland cities such as Guangzhou and Shenzhen have historically exhibited development indicators significantly more positive than other cities within the country, their growth will naturally slow down as those markets mature. Thus, lower-tier cities, which currently account for more than two-thirds of China’s economy and more than 70% of its population, will be key to unlocking the next phase of growth.

In the past few years, living standards in the tier-three and tier-four cities of Guangdong province have recorded a remarkable improvement with disposable income per capita in cities like Foshan, Dongguan and Zhongshan exceeding that of most tier-two cities in China. In 2017, the average disposable income per capita of the lower-tier cities in Guangdong reached RMB 33,437, above the average of RMB 31,115 for tier-three and tier-four cities in the country as a whole. And they have benefitted from income convergence: in 2017, disposable per capita incomes in the lower-tier cities of Guangdong stood at 53.9% of the figure for China’s tier-one cities, compared to 51.6% in 2012. In contrast, disposable income in lower-tier cities in the rest of the country decreased from 55.2% of that in tier-one cities in 2012 to 53.3% in 2017.

Driven by growing incomes, consumer expenditure in the tier-three and tier-four cities increased by 64.6% over the years 2012-2017, while average growth in lower-tier cities in the rest of the country was just 36.6%.