The City Strata framework categorizes 286 prefecture-level cities into 11 segments, or strata. The variables used to create this portrait of urban China indicate an urban economy’s capacity (or lack of capacity) to grow and adapt as the national economy undergoes a profound transition, and hence its capacity to support growth in consumer spending.

We identify the 40 cities that provide the best opportunities over the next decade for consumer sector companies and 39 that offer secondary opportunities. The prevailing narrative that companies should move into Tier 3 and Tier 4 cities in China’s official classification system is misleading, as is the view that companies must be present everywhere to be competitive. A successful growth strategy will need to be much more selective. Wide adoption of the city strata system will enable businesses to make better regional investment decisions and communicate them more efficiently.

City Stratum Number of cities Population (2014)
Super These are the best-known Chinese metropolises, and thus the first staging ground for MNCs looking to enter the China market. Many MNCs are already familiar with them, but competition among brands in these cities is intense. 6 153M
Affluent While they are not geographically concentrated, location has given Affluent Cities a leg up, and high levels of wealth, fast growth, and relatively deep connections to the global marketplace through trade and investment make Affluent Cities some of China’s most vibrant and inviting urban spaces. 21 233M
Satellite As their name suggests, Satellite Cities tend to be within a one- or two-hour drive of an Affluent City, or occasionally a Super City. They are smaller than Affluent Cities but benefit from being on the periphery of their neighbors’ economic ecosystems and have relatively high levels of wealth. 13 50M
Regional International Regional International Cities have evolved largely as gateways to certain regions within China or to foreign markets such as Russia, Mongolia, Kazakhstan, and Vietnam. Proximity to and cultural interaction with non-Chinese markets make most Regional International Cities idiosyncratic and somewhat isolated. 9 59M
Integrated Industrial Most Integrated Industrial Cities have made the transition over the past two decades from reliance on mining and minerals to developing large industrial sectors, producing at least one large regional industrial champion. Continued reliance on heavy industry makes these cities particularly vulnerable to weak demand and acute industrial overcapacity. 30 166M
Inland Core These cities are usually important components of inland city clusters, metropolitan circles, or economic development zones, and as such are smaller, domestically focused versions of Affluent Cities. While geographical locations and industrial structures vary throughout this stratum, disposable income and consumption rates are right on the national average. 52 201M
Resource-Exhausted Heavy dependence on mineral resources jeopardizes the economies of these relatively small cities. Location in remote mining regions means they are, almost by definition, cut off from much of the rest of the country. Current levels of consumption and residents’ overall purchasing power are weak, due largely to their low-value-added industrial structures. 26 48M
Tourism Tourism cities are largely defined by their connection to a site of natural beauty. In terms of the number of tourists they attract annually, they are second to Super and Affluent Cities. These cities enjoy stable economic growth owing to the steady influx of visitors and a well-defined economic rationale. 8 16M
Modern Agricultural Modern Agricultural Cities are akin to Integrated Industrial Cities in that they have had some success in diversifying away from their primary resource, arable land. As with Traditional Agricultural Cities, populations are shrinking faster than anywhere else in China, raising a red flag for companies considering entering these markets. 22 87M
Frontier Just like so-called frontier markets in the world of finance, Frontier Cities look to achieve high growth rates from a low base. MNCs should exercise caution over the 56 Frontier Cities: their markets are generally too shallow for any but the most basic goods. 56 202M
Traditional Agricultural These “cities” are hardly cities at all. They have very low urbanization rates and rely heavily on agriculture to drive economic growth. Population shrinkage is the fastest among the five lowest strata. These cities are the least desirable in the country – for their own inhabitants as much as for MNCs. 43 163M