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Developing China's heartlands
WHILE large metropolises such as Shanghai and Beijing have often been seen as the engines of China's economic growth over the last few decades, the country's future expansion is likely to be fuelled by its smaller cities.
Around 170 Chinese cities have more than one million residents, but only four - Shanghai, Beijing, Guangzhou and Shenzhen - are considered "first-tier" in terms of size, per capita GDP and incomes.
One step down in those terms are the so called Tier Two cities, which are often defined as the country's provincial capitals and special administrative cities. Meanwhile, any prefecture level or county-level capitals are generally classified as third tier, although this distinction is not always precise. More than 300 million people live in China's smaller cities, almost equivalent to the population of the United States.
As the first-tier cities mature, much of the spending on public infrastructure and housing will happen in second and third-tier cities, presenting more business opportunities to companies in this space. A survey conducted earlier this year also showed that second-tier cities offered stronger job prospects than the larger metropolises because rapid urbanisation and a growing manufacturing sector are resulting in rising demand for labour.
Singapore companies which started their operations in China's first-tier markets are now leveraging that experience to expand into these smaller but fast-growing regions.
"While first-tier cities present greater opportunities for business, competition is stiff in these more mature markets. Established brands and businesses can leverage these opportunities to springboard their expansion to other cities in China," said Wong Wing Kien, CEO of Ascendas China, a unit of the recently merged Ascendas Singbridge group.
Singapore-based Ascendas has been in China for 20 years, and continues to see good demand for its business spaces. Today, the company has projects in 11 cities including Beijing, Chengdu, Chongqing, Dalian, Guangzhou, Hangzhou, Jilin, Shanghai, Suzhou, Tianjin, and Xian.
"We are focused on the execution and completion of our projects and where suitable opportunity arises, we hope to continue deepening our presence in these locations," said Mr Wong.
Another Singapore enterprise looking to expand their footprint in China's heartlands is Keppel Corporation. The diversified group has operations across 25 cities in China in the property development, infrastructure and logistics and as well as offshore and marine sectors.
Said Keppel Corporation CEO Loh Chin Hua: "While we want to deepen our presence in the first-tier cities of Beijing, Shanghai, Guangzhou and Shenzhen which offer great opportunities, we also find the second-tier and even third-tier cities, especially the high growth ones, attractive."
For instance, Keppel Land's key cities in China include Tianjin, Chengdu and Wuxi. The developer is also developing its first integrated residential cum marina lifestyle development, Keppel Cove, in Zhongshan City, Guangdong Province. Another subsidiary, infrastructure firm Keppel Seghers, secured a contract to provide technology packages and services to a waste-to-energy (WTE) plant in Guilin, China.
However, these industry players warn that there is an oversupply of real estate in several tier 2 and tier 3 cities, and that may pose a challenge to some projects. The fierce competition for talent is another obstacle operating in these markets.
The evolution of China's continued development also means that the model for Sino-Singapore cooperation will need to change as well. Beyond just the transference of Singapore knowledge and technical know-how to Chinese entities, there needs to be greater collaboration between partners to facilitate an exchange of knowledge and expertise. This is especially important as many projects in the infrastructure space have a mid-to-long gestation period.
Therefore, Ascendas aims to be more than just a property developer, and is working towards building long-term and mutually beneficial partnerships in the markets it operates. To achieve this, the company works closely with the governments of its host locations to create solutions that can contribute to the economic and social development of those cities.
Said Mr Wong: "As a commercial entity, it is essential for Ascendas-Singbridge's projects to be profitable, and at the same time, we aim to create value for our customers. We want to be more than just a landlord, and to differentiate ourselves by creating innovative products and services that enable our customers to grow and succeed in our developments."