Investment Guide in China's Developing Regions: Opportunities Beyond Major Cities

According to the latest data from the Carnegie Endowment for International Peace, China shows significant variation in investment patterns between cities of different levels, creating diverse investment opportunities beyond major urban centers.

Investment Distribution Across City Tiers

Data from a sample of 40 Chinese cities shows that investment intensity - known as the investment-to-GDP ratio - was notably higher in third and fourth-tier cities, averaging 58% in 2024, a figure far exceeding the national average of 40%.

This indicates that massive fixed investment remains the dominant economic driver in these cities. These massive investments are considered a direct response to the ongoing real estate downturn, as local governments compensate for financial revenue losses from real estate development.

Opportunities for Multinational Companies

The divergent paths of China's cities of different levels carry important implications for multinational companies:

• First-tier cities: Remain optimal destinations for high-value activities like R&D, regulatory interaction, and premium consumer offerings
• Selected second-tier cities: Emerge as attractive alternatives, combining growing consumer markets and improved capital efficiency
• Lower-tier cities: Require more cautious and selective engagement despite progress toward better-targeted investments