Zong Qinghou

Cities still main consumers, despite drive to help villages

PUBLISHED : Monday, 03 April, 2006, 12:00am
UPDATED : Monday, 03 April, 2006, 12:00am


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Authorities hoped a campaign launch last year would trigger a rush of investment in underdeveloped regions as part of the nation's goal to set up 250,000 supermarket chain outlets in villages and towns by 2008.

The aim is to give people outside major centres access to a wider variety of consumer goods but while there is no word on initial results of the supermarket drive, researchers insist the best prospects for retailers remain in prosperous cities, and particularly in the east.

Shanghai, Beijing, Shenzhen, Guangzhou and Hangzhou are the top five mainland cities for potential returns on commercial property investment, according to the 2005 annual report on urban competitiveness by the Chinese Academy of Social Sciences.

The report's authors assessed the value of opening shops, stores and offices in 50 mainland cities based on factors including their economic openness, public infrastructure, human resources, market scale and land costs.

'Over the next 15 years or longer, urban areas will still be China's economic engines, despite central government calls to develop underdeveloped areas,' State Council Development and Research Centre market institute director Ren Xingzhou said.

China's average urban income last year was 10,493 yuan, compared with 3,255 yuan in the countryside. In the more prosperous eastern Zhejiang province where Hangzhou lies, income was 16,294 yuan while urban residents in landlocked Gansu province earned 8,086 yuan.

Ms Ren said the government should allocate more money to support underdeveloped areas and encourage them to build on their advantages.

In the academy's report, 14 of the top 20 cities were in the east and just six were urban areas in the central or western regions.

'Shanghai, Shenzhen and Beijing are the core areas of business centres of the Yangtze River Delta, the Pearl River Delta and around the Bohai Sea delta. respectively. They are the top choices for commerce,' the report's chief editor, Professor Ni Pengfei, said.

'Wuhan, the capital of Hubei was ranked eighth because of the quality of its work force and the large market of its nearly eight million people.'

Consumption in the underdeveloped areas has changed little in the past decades, according to Zong Qinghou, president of the mainland's leading beverage maker, Wahaha, but customers in these areas were still important because they contributed the bulk of the company's 14 billion yuan in sales last year.

'Whatever we supply they consume. They don't have many choices because a provider alone can hardly afford the transport costs and there are no economies of scale. It's risky for a retailer to set up a big business there,' he said.

'Local distributors know more about their local markets, so they could make wise decisions on goods volume, type and others. And they usually have good relationship with local governments, which is very important on the mainland,' said Mr Zong.