China rise to come from Tier 2 cities

By Simon Warburton | 11 July 2016

Two-child China policy could see rapid population rise - with transport conundrum

Two-child China policy could see rapid population rise - with transport conundrum

Significant growth in China's cities is likely to come through second and third tier centres as the country swiftly looks to become a 30m vehicle market in the next few years.

Despite a brake on previous runaway growth that saw China enjoy double digit increases, a 'new normal' of the economy settling to around 5%-6% rises, will still trigger enormous demand for vehicles complete with an urbanisation conundrum for transport planners.

China's Ping an Bank forecasts the domestic automotive market will reach 28m-30m vehicles by 2020 as outlined in the government's 13th five-year plan, with a Shanghai-based centre estimating this could be partly driven by secondary city growth.

"People keep talking about the gravity going to Tier 2 and Tier 3 cities," Michigan China Centre director, Ning Shao, told just-auto on the sidelines of the recent Global Automotive Forum in Chongqing. "Mega-growth like Beijing, Shanghai, will not enjoy [similar] growth to second cities.

"Emerging urbanisation of China is happening quickly in the second tier of regional China. [For example] Chongqing today has the highest GDP growth in whole of China. That trend is going to balance out congestion of the mature markets of Beijing and Guangzhou.

"In Beijing, you can have a car, but you can not drive on certain days of the week. Pollution is part of it, congestion is the other one. This is not an issue [from a] second and third tier perspective."

Chongqing – one of China's fastest growing cities despite it not yet being in the mega league – is part of Beijing's historical 'Go West' policy which has seen emphasis shift from the huge coastal regions on the Eastern Seaboard to further inland.

China's recent decision to relax its strict adherence to a one-child policy – which has seen an artificially induced inverse pyramid of a vast elderly population having to be cared and paid for by a dwindling younger one – could also see yet a further increase in citizens – and transportation headaches.

"In China, economic development after the reform in 1978 has been focused on the coast, all the way from Hong Kong to Shanghai and coast cities," added Shao.

"Therefore [there was] inequality like distribution, so Go West policies and other iterations of that [happened] in Manchuria and the North East. That area has been hit hard with the structure changing from State-owned to a market economy.

"It is part of China's economic policy, which is paying off and monetary policy for government-owned companies to invest in areas like the West region [of] China would enjoy special privileges."