Cities like Nanjing may be smaller than Beijing or Shanghai, but actually surpass tier one cities in terms of GDP per capita. Moreover, the cities have been overlooked by international tourist firms. Photo: Shutterstock

TripAdvisor revealed this year that interest in Chinese travel to Thailand is driven by searches from second-tier cities, opposed to first-tier cities like Beijing and Shanghai. Searches for Thai travel in Hangzhou, Dalian, and Qingdao were up 91 percent, 81 percent, and 65 percent respectively. The China Tourism Academy has also noted that interest in foreign travel in second and third-tier cities is increasing dramatically.

Second and third-tier cities in China will be the primary drivers of economic growth and demand for international goods and services in the future

These findings underscore what China watchers have known for a long time: China’s second and third-tier cities will be the primary drivers of economic growth and demand for international goods and services in the future. Per capita incomes are rising rapidly in many Chinese cities, and more and more professionals in China no longer see the need to travel to first-tier cities to seek gainful employment.

Of course, China’s coastal cities like Tianjin, Beijing, and Shanghai have both the highest HDI and largest economies, but many regions in China are catching up quickly, especially in per capita terms.

When comparing data by administrative regions, China’s first-tier cities, Beijing, Tianjin, and Shanghai, top the list as the wealthiest cities in by average per capita GDP. These cities each had a nominal GDP per capita between $17,000 and $18,000.

These figures put Beijing, Tianjin, and Shanghai far above China’s other administrative areas. However, even though provinces like Jiangsu, Guangdong, and Zhejiang are substantially less wealthy overall than first-tier cities because they include significant rural populations with substantially lower incomes, major provincial, second-tier cities rival or even surpass Beijing, Tianjin, and Shanghai.

Cities in Jiangsu, like Nanjing, Suzhou, and Wuxi, all have higher GDP per capita than China’s first-tier cities, each upwards of $18,000. Other major cities like Guangzhou and Shenzhen (both in Guangdong province) have a higher GDP per capita than Beijing, Shanghai, and Tianjin.

Overall, this data helps us understand that it is larger, rich provinces in China with large numbers of wealthy or middle-class individuals that will promote the most growth for Chinese outbound tourism. Smaller second-tier cities like Nanjing, Changsha, Wuxi, or Dalian, while less cosmopolitan, still have large numbers of individuals that have the disposable income to spend on travel.

Many of these people maybe middle class Chinese, who have never had the opportunity to travel abroad before and may be more enticed by the relatively lower hassle of travel to destinations like Thailand or Indonesia, which have cheaper price tags and shorter travel times.

International travel and retail firms should consider looking to less traditional Chinese cities for new growth opportunities

When foreign firms are looking at how to attract more significant numbers of Chinese tourists or even just selling luxury goods or services, they may want to look for less traditional targets of foreign interest. These markets may not provide an immediate return on investment in marketing or retail infrastructure, but the long-term growth potential is clearly there.