China's "Second Tier" Cities
While internationally acclaimed cities like Beijing and Shanghai have led the charge for China's phenomenal growth in recent years, indications are that many of the country's more underdeveloped remote locations, inward from the eastern coast and toward the western region, are primed for future growth. According to the U.S.-China Business Council an increasing number of foreign companies are moving from China's more developed coastal areas to inland cities.
Such cities include, but are not limited to: Changchun, Chengdu, Chongqing, Dalian, Dongguan, Guiyang, Haikou, Hangzhou, Hefei, Kunming, Lanzhou, Nanjing, Ningbo, Qingdao, Shantou, Shaoxing, Shenyang, Taiyuan, Urumqi, Wenzhou, Wuhan, Xiamen, Xi'an, and Zhuhai
We aim to direct our focus more on second tier cities in the future, with more coverage and new business and investment proposals for foreigners wishing to enter what will undoubtedly be strong and quickly growing markets.
Why Second Tier Cities?
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Growth Potential. As the Chinese government has continued to employ cooling measures in red-hot property markets in the larger cities, more attention is moving toward the nation's second-tier locations, predominantly, those locations in the south and west of the country where growth was slow, development nearly non-existent. But change happens in China, and city by city, it's happening quickly. Such cities are known to have high internal rates of return (IRR), a means for measuring the annual yield on an investment project.
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Governmental Incentives. The creation of special economic zones, high-tech development zones and economic technological zones under programs such as the western regional development strategy are of key importance to encourage foreign funds to invest in second-tier cities. Second-tier cities have greater potential for investment as a result of increased transparency and consolidation in the market.
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Population Shifts. While recent governmental policies have helped sway potential investors away from the already established and decidedly more expensive major cities, long-term demographic trends are also a contributing factor. As urban populations around the country continue to expand, investors are finding new opportunities for growth in these markets, particularly in real estate. Second-tier residential prices are expected to continue growing well into the future.
Profiting from Real Estate in China's Second Tier Cities
Despite the Central Government's attempts to slow rising property prices, such as hikes in interest rates, land tax and short-term capital gains, second-tier cities remain attractive and cost-effective alternatives to their bigger name counterparts. Preferential treatment such as tax incentives and flexible bank loans are also catalysts for second-tier city development.
