Since 2009, a greater proportion of the global population has lived in urban areas than in rural areas. Cities are key centers of economic, political, and cultural activities. “Global cities” are particularly critical nodes within the international economy, as they provide specialized services, such as finance, and serve as hubs for innovation. Countries with more global cities can thus better benefit from the international flow of capital and talent. As China has rapidly developed in recent decades, historically prominent Chinese cities such as Beijing and Shanghai have grown in international influence, and many new global cities like Shenzhen have emerged as increasingly significant players in global commerce.
Patterns of Global Cities
The employment opportunities brought by Chinese economic reforms launched in the late 1970s led to a surge of people moving out of rural areas and into cities. In 1979, only 18.6 percent of the Chinese population resided in urban areas. In 2011, more than half of all Chinese citizens lived in cities for the first time in history, and by 2020 the urbanization rate in China stood at 61.4 percent.
In addition to domestic population movements, the growth of Chinese cities has drawn travelers, students, and workers from other countries. International companies have also set up offices in different cities to better access China’s vast market. As a result, cities have become one of the main gateways through which China interacts with the world.
The global influence of Chinese cities has expanded over the past decades. International consultancy Kearney ranks cities around the world in its annual Global Cities Index (GCI). Based on 29 indicators, Kearney evaluates each city’s performance in five areas: business activities, human capital, information exchange, cultural experience, and political engagement.1 The composite ranking reflects the relative influence of a city on the world.
|Top Countries in the Kearney Global City Index (2020)|
|Country||Number of Cities
in the Ranking
(Out of 125)
|Note: Includes only the top 125 cities|
As countries with larger populations typically boast a higher number of urban centers, it is unsurprising that the most populous countries – China, India, and the US – have the greatest number of global cities. In Kearney’s 2020 GCI, 18 Chinese cities ranked among the top 125 global cities.2 The US came in second with 14 cities and India came in third with seven. While there are more global cities in China, on average a global city in China ranks lower (82) compared to those in other countries (31 in the US or 33 in Germany).
Notwithstanding the lower ranking, the global influence of Chinese cities has trended upward over the past six years. In 2015, the average ranking of a Chinese global city was 93. Among the five countries with the largest number of global cities, only Germany showed similar improvement (from 38 in 2015 to 33 in 2020). The average ranking of cities in other top-five countries declined to different extents between 2015 and 2020 (from 28 to 31 in the US; 81 to 91 in India; and 78 to 98 in Brazil).
The World’s Global Cities
Chinese cities owe much of their global influence to high levels of business activity. Some of China’s global cities, such as Beijing, Shanghai, and Hong Kong, have traditionally served as hubs of economic activities, and they remain dominant today. Over 43 percent of the 124 Chinese companies included in the 2020 Fortune Global 500 are headquartered in Beijing. Shanghai and Shenzhen are each home to another 7 percent of Chinese Fortune Global 500 companies. Additionally, Shanghai and Hong Kong are global leaders in sea and air freight respectively, and Hong Kong ranks first in the world in terms of Initial Public Offering (IPO) proceedings, many of which are for mainland Chinese companies.
Outside of big cities, lesser-known cities, such as Shenzhen, Guangzhou, Hangzhou, Ningbo, and Suzhou, have considerably grown their global influence given their roles in the Chinese and world markets. India, which also experienced tremendous economic growth over the past few decades and is roughly as populous as China, saw fewer new global cities emerge. There has also been a downward trajectory in their rankings from 2015-2020. New Delhi, which improved slightly from 57 in 2015 to 56 in 2020, is the exception.
While top Chinese global cities attract significant business activities, they score lower in political engagement relative to their counterparts in North America and Europe. Few influential international organizations are located in Chinese cities compared to Washington, D.C. (home to the World Bank and International Monetary Fund), Brussels (where the European Union and NATO are headquartered), Geneva (where the World Health Organization and World Trade Organization are located), and New York (home to the United Nations). The international political center of gravity could shift toward Beijing as China builds more international institutions, such as the Asian Infrastructure Investment Bank and the Shanghai Cooperation Organization, but for now the US and Europe remain dominant.
The Cultivation of Global Cities in China
Over the last several decades, the Chinese government has pursued efforts to develop its cities into key centers of trade, investment, and commerce within the world economy. More recently, China’s leaders have also sought to transform Chinese cities into global innovation hubs.
While cities like Beijing and Shanghai have been prominent historically, the growth in cities such as Shenzhen is the product of deliberate government policies. When economic reforms began to take place in the late 1970s, the Chinese government designated four areas – Shenzhen, Zhuhai, Shantou, and Xiamen – as “Special Economic Zones” (SEZs). SEZs were permitted to experiment with economic policies not allowed in other parts of China, including accepting foreign direct investment and relaxing price controls. More and more coastal areas were granted SEZ status in subsequent years. By 2019, China established 2,543 SEZs, almost half (47.2 percent) of all SEZs in the world. By comparison, India had just 373 SEZs.
For decades, China’s cities largely functioned as manufacturing hubs for low-cost goods, such as clothing and textiles, but this has changed in recent years as their industrial capacity has expanded and matured. Many Chinese cities are now home to manufacturers of more advanced products, such as electronics and petrochemicals. Shenzhen’s Hi-Tech Industrial Park, for instance, is home to Chinese tech giants like Huawei, ZTE, Tencent, Alibaba, and Baidu. This has earned Shenzhen the nickname “China’s Silicon Valley.”
Fortune’s Global 500 ranking included 124 Chinese companies in 2020. Together they took in combined revenue of $8.3 trillion – nearly a quarter of the $33.3 trillion in revenue generated by all 500 companies on the list. Learn more about China’s companies and how they are competing on the world stage.
The central government, and later municipal governments, also made efforts to attract multinational corporations to expand their presence in Chinese cities since the late 1990s. They introduced incentives such as reduced taxes, rent subsidies, and preferential policies for employees of large international corporations that were willing to set up regional headquarters and offices in mainland China.
While Hong Kong and Singapore remain more popular locations for international brands to manage their Asia-Pacific businesses, mainland Chinese cities have become attractive options. Shanghai alone was home to 730 regional headquarters of foreign companies as of March 2020, including Ford, GE, and Kraft. In Beijing, PricewaterhouseCoopers and Volkswagen established regional headquarters. IBM moved its global procurement headquarter to Shenzhen in 2006, and Google opened its third China office there in 2018.
This influx of business activity has dramatically increased the economic size of Chinese cities. In 2019, Shanghai had a gross regional product (GRP) of $552.3 billion – slightly higher than the entire GDP of Thailand. Similarly, Beijing’s GRP reached $512 billion, making it nearly as large as Belgium’s economy. Shenzhen (GRP of $389.8 billion), Hong Kong ($365.7 billion), and Guangzhou ($342.1 billion) rounded out the top-five largest cities in China by economic output. While China’s largest cities are immense in their economic scale, a few cities are larger still. The New York City metropolitan area had a GRP of over $1.86 trillion in 2019, which is slightly larger than Brazil, the world’s ninth-largest economy.3
Beyond just economic clout, Chinese cities are emerging as global leaders in science and technology (S&T) innovation. According to the 2020 Global Innovation Index, which ranks city clusters based on their output of patents and scientific publications, two of the world’s top-five S&T innovation clusters are located in China. In the rankings, China’s Shenzhen-Hong Kong-Guangzhou cluster comes in second behind Japan’s Tokyo-Yokohama cluster, and ahead of Seoul, South Korea. Meanwhile, Beijing ranks fourth, ahead of the San Jose-San Francisco area in the US and the Osaka-Kobe-Kyoto region in Japan.
Research and development (R&D) – the backbone of innovation – is highly concentrated in a few cities in China. Just three cities – Beijing, Shanghai, and Shenzhen – accounted for 23 percent of China’s total spending on R&D in 2019. These cities also have higher levels of R&D intensity, a measure of spending on R&D as a percentage of economic output. At 6.31 percent of GRP in 2019, Beijing’s R&D intensity was nearly three times the national average (2.23 percent). Shenzhen’s R&D intensity was more than twice the national average and Shanghai’s was about 1.8 times the national average.
|R&D Expenditure in Select Chinese Cities (2019)|
(Billions of US$)*
|R&D Spending as a % of GRP|
|*Based on average USD-RMB exchange rate of 6.91 in 2019|
|Source: National Bureau of Statistics of China; Guangdong Province Bureau of Statistics|
Unsurprisingly, China’s top cities are home to the majority of the country’s higher education institutions, which perform over seven percent of the country’s total R&D. Of the top 50 Chinese universities in the 2020 Times Higher Education rankings, 12 are located in Beijing. Several are also located in Nanjing (7 universities), Shanghai (5 universities), and Wuhan (4 universities). These universities train many of China’s top students, many of whom go on to work in science and engineering fields. They also train many international students. According to China’s Ministry of Education, 492,185 foreign students studied in China in 2018, with roughly 28.8 percent of them studying in Beijing and Shanghai alone.
Fierce Competition on the Global Stage
Despite their growing clout, China’s major cities face fierce competition on the world stage. Rapid urbanization has also generated a number of social and environmental challenges in some of the country’s most important cities.
While Chinese cities are making advances toward becoming global hubs for innovation, they face serious competition when it comes to attracting global talent in key industries. In the field of artificial intelligence (AI), for example, many of China’s top talents leave China to pursue employment or additional study. According to analysis by MacroPolo, only 31.6 percent of AI researchers who received undergraduate degrees in China pursued graduate studies in China. Instead, 58.3 percent of Chinese AI researchers pursued a graduate degree in the US, and of these, 32.6 percent remained in the US to work after graduation. This suggests a limited ability of China and its cities to retain the necessary talent to compete in the global innovation race – at least in the short-run.
Recent global economic and geopolitical developments represent another potential threat to the competitiveness of Chinese cities. After years of tense trade relations between the US and China, a May 2019 survey by the American Chamber of Commerce in Shanghai found that 33.2 percent of US companies were considering cancelling or delaying investments, and 39.7 percent of respondents were considering relocating manufacturing facilities outside of China (or had already done so). Months into the Covid-19 pandemic, a June 2020 survey of 200 companies found that 95 percent of US respondents planned to change their suppliers away from China. The movement of US supply chains out of China, and broader decoupling of the two economies, could pose a serious challenge to the international influence and economic competitiveness of Chinese cities.
Chinese cities have also experienced growing pains stemming from rapid population increase. Over the 1990-2015 period, the world’s three fastest-growing large cities (populations above 10 million) were in China. The largest growth occurred in Shenzhen, which saw its population skyrocket nearly 1,200 percent from 875,000 in 1990 to nearly 11.3 million people in 2015. The two other cities – Guangzhou and Chongqing – saw their populations increase by 260 percent and 233 percent, respectively. These cities have seen their population growth slow in recent years, but Chongqing remained the world’s fifth fastest-growing large city during the 2015-2020 period, behind Kinshasa (Dem. Rep. of the Congo), Lahore (Pakistan), Bangalore (India), and Dhaka (Bangladesh).
|The World’s Fastest-Growing Large Cities (1990-2015)*|
|% Change (1990-2015)|
|Kinshasa||Dem. Rep. of the Congo||3,683||14,342||289%|
|*Among cities with a population greater than 10 million|
|Source: United Nations|
Rapid urbanization has created a range of social problems. Higher population density has led to high property prices and costs of living. In Shanghai and Beijing, home prices ranged from 15 to 20 times the average household income in 2018 compared to a housing price-to-income ratio of 9.2 in San Francisco and 5.4 in New York City in 2017. Some cities have also seen steep rises in home prices in a short period of time. In Shenzhen, for example, the average price of second-hand home sales jumped 82 percent between January 2015 and September 2020.
Burgeoning populations have also led to greater resource usage and higher pollution emissions. In Beijing, the availability of water declined from 1,000 cubic meters per capita in 1949 to less than 230 cubic meters in 2007, leaving the city facing “extremely high” water scarcity. Up to 80 percent of Hong Kong’s water is imported from Dongjiang in Guangdong, and Shanghai increasingly relies on diverted Yangtze River water because the Huangpu River has become too polluted. Inhabitants of many cities also suffer health and economic costs from air pollution. In 2019, air pollution from small particulate matter (known as PM 2.5) led to 1.42 million premature deaths in China. During the first half of 2020 alone, air pollution in Beijing and Shanghai led to an estimated 49,000 premature deaths and $23 billion in economic damages.
The central government is taking a number of steps to promote more even urban development. China’s two most populous cities, Shanghai and Beijing, will see their populations capped at 25 million and 23 million people, respectively. The Chinese government has also embraced the idea of “city clusters.” The government’s 13th Five-Year Plan called for setting up 19 city clusters, each of which would be made up of a central hub surrounded by smaller satellite cities. The largest of these are the southern Pearl River Delta (with Hong Kong as the hub), the eastern Yangtze River Delta (with Shanghai as the center) and the northern Jing-Jin-Ji Metropolitan Region (anchored by Beijing). In all, China’s 19 city clusters are expected to host 90 percent of future Chinese economic activities.