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2 Playing the Waiting Game
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32 On Top of the World
33 Moonlight Madness
34 Beijing's Wild West
35 Avatar vs Confucius
36 Brand Ambassadors
37 Inspiring Adventure
38 China's Sweet Spot
39 Spinning the Wheel
40 Winter Wonderland
41 The End of the Sky
42 Ticket to Ride High
43 Turning the Corner
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45 Watch with Mother
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47 In a Barbie World
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China's Sweet Spot

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Dancing in the streets of Neijiang

People have been calling it “Sweet City” [Tian Cheng] for generations.  The name pays tribute to Neijiang's erstwhile regional importance as a producer of candied fruit [guofu] and grower of sugar cane.  Guofu can still be found – if you are prepared to search for it that is.

ut, as befits the way it is sold in the few surviving local street markets, what’s left of the industry is merely a quaint side-stall on the outer fringe of the fast-developing Neijiang economy.  But that's not to say that things have turned sour for Neijiang's 4.3 million people.

On the contrary, the fast-rate of economic growth that Neijiang has enjoyed in recent years (16.2 per cent year-on-year GDP growth in 2010), and the significant growth opportunities that are accruing from the city’s position at the centre of the newly-established Chengdu and Chongqing economic zone, suggest that Neijiang is still living up to its “Sweet City” promise. 

But what about the recent slowdown in China's economic development (the country is likely to finish the year with a growth figure of about 9 per cent), and the significant problems that many exporters are encountering because of the drop-off in demand… surely these factors will feed through to the local economy and render last year’s 16.2 per cent growth unsustainable?  

Well, as jaw-dropping as the Neijiang GDP figure is, it appears that it can be maintained at very close to this level (at least for this year and next).  Tang Limin, the Neijiang Party Chief and head of the Neijiang city government, told me when I interviewed him on the 4th November that Neijiang is on track to deliver 15.5 per cent year-on-year GDP growth in 2011; which he forecast would increase to 16 per cent growth in 2012.

As well as revealing positive news on the city's GDP growth forecast, Mr Tang also told me that he was confident that his city's position at the heart of the new economic zone would ensure that increasingly more domestic and foreign investors would realise that Neijiang is the place to come.  He was also convinced that the value of Neijiang's exports would grow significantly (the city exported goods and services to the value of US$168m in 2010, spread across 68 countries).    

During the 90 minute interview, Mr Tang repeatedly turned to point at the huge map of the area that was mounted on the wall behind us.  The map looked as if it had been produced by someone from Neijiang's public affairs department, because a series of concentric ovals (with Chengdu and Chongqing on opposite sides of the innermost oval) drew attention to Neijiang city at the heart of it all.

To further emphasise Neijiang's centrality, a line that represents the main Chengdu to Chongqing highway cut from east to west along the centre of the oval, bisecting Neijiang (thankfully, the expressway is actually several minutes drive from the city centre).

“Xin!” … [Heart], said Mr Tang, …"Neijiang is at the heart!" [of the new economic zone].  But I had been wrong to think that this concept had been dreamt up by local politicians keen to assert their claim to the centre of the zone.

The Neijiang Party Chief pointed out that the map had, in fact, been drawn up by none other than China's central government.  Then I realised just how significant the map is.  Neijiang (a "tier 3" city) at the heart is flanked by the municipality of Chongqing to the east and Chengdu, the provincial capital of Sichuan, to the west ("tier 1" and "tier 2" cities respectively in political terms at least).  

Quite clearly, as well as being the "Sweet City", Neijiang is also a proxy for the "Sweet Spot" of China's future economic development. 

As Beijing and Shanghai languish in the (relative) doldrums of high single-figure GDP growth in the next few years, third tier cities such as Neijiang, and many fourth tier cities as well, have been handed the baton of double-digit economic growth.

The cities that will score the highest are the cities that will be able to feed and feed off the city economies of economically-vibrant adjacent larger cities (Neijiang is particularly blessed therefore because Chengdu and Chongqing are growing at 15 and 17 per cent respectively).

The stunning performance of Neijiang-like smaller cities in terms of GDP growth is also feeding through to significant increases in their residents' personal wealth, disposable income, and the amount of money that is spent on brands and stuff.  In Neijiang, for instance, sales of consumer goods in 2010 exceeded 20 billion RMB, a year-on-year increase of almost 19 per cent.   

In summary, consumers in so-called “lower-tier” cities will take an ever-larger share of China’s consumption pie.  This has been glaringly obvious for a long time of course, but understanding what to do about it from a marketing perspective has not been as well documented. 

Simply switching focus from “upper tier” to “lower tier” cities may sound like a good idea to some, but not all lower tier cities are developing equally of course.  And, as is demonstrated by Chengdu and Chongqing, some “higher tier” cities deserve to be the focus of more, not less attention.

Or, putting it another way, China-wide marketing and distribution strategies that are not built on an exhaustive city by city evaluation of economic reality and potential – as well as residents' standard of living and well-being – have every chance of missing China's Sweet Spot. 

 This article was written in November 2011 when the author was chairman of Oracle Added Value (now part of Kantar Consulting), and published on Kantar's website.

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