1. Supersized cities China’s 13 megalopolises Economist Intelligence Unit July 2012

2. About the Economist Intelligence Unit (EIU) Research arm of The Economist Group for business executives 380 analysts and industry specialists worldwide covering Analysis and forecasting for over 200 countries and territories Risk assessment Industry data and trends: automotive, consumer goods, energy, financial services, healthcare, technology Market sizing Custom client research Visit www.eiu.com to register for free macroeconomic information on 187 countries

3. Today’s Presenters Liu Qian Deputy Director, China Forecasting Services Economist Intelligence Unit Duncan Innes-Ker Regional Editor Economist Intelligence Unit

4. 4 Access China Analysis  Analysis of regional trends in China  31 provinces + 287 prefectures Data  National Bureau of Statistics  Data cleaning Forecasts  State-of-the-art econometric framework—dynamic time series  Out to 2020

5. China’s growth prospects 2012 has been rockier than anticipated But longer-term fundamentals remain the same China’s development still has far to go— watch the regional story

6. The rise of the Chinese megalopolis

7. How many millions? What is a megalopolis?  Megacity or megacity grouping with metropolitan population over 10m  Part of broader government moves to integrate larger urban areas to achieve economies of scale  Also results from spread of economic growth inland Why does it matter?  One-third of the urban population will live in one of these megalopolises by 2020  In most of them the majority of their populations will reach middle-class status

8. How many millions?

9. First three megalopolises are well known Richer, and continued draw for the educated Will continue to see population growth faster than the national average in 2010-20. From three..

10. ….to thirteen. The seven emerging in this decade (2010-20) will be poorer and younger Driven by intra- provincial migration… …which is in turn driven by improving local economic opportunities

11. The young and the restless Migrants are young But the megalopolises are starting to mature rapidly

12. The young and the restless Not all the megalopolises will develop, and therefore age, in the same way.

13. From zero to 50 Wider development of the middle class is central to China’s consumption story Urban disposable income of Rmb30,000 (nearly US$5,000) used as benchmark Megalopolises that emerged earlier are reaching the point where more than 50% of their populations are middle- class earners…

14. From zero to 50 …but not all the megalopolises will hit the 50% mark by 2020.

15. Incomes? Shades of grey Income tends to be understated in official household surveys. EIU’s estimates show large discrepancy. Official figures say 12% of Chinese households earned more than Rmb80,000 a year in 2010. When adjusted for grey incomes, this reaches 32%.

16. Impact on business

17. Education Megalopolises provide weak access to education in comparison with smaller cities Population growth outstripped the rise in the number of schools and teachers needed to educate them Southern China clusters fare particularly poorly People’s Daily Online

18. Retail—the case of Chengdu Regional shopping centre for the wealthy in neighbouring provinces Local government has set a goal of bringing 20 top international brands to the city every year in the period up to 2015 City’s entertainment offerings to expand People’s Daily Online

19. Healthcare Strain set to increase significantly  Range of resources needed to treat ailments associated with urban living  Several of the megalopolises are already starting to age  They are not yet fully equipped to care for the population boom  Not all of them have the same health needs Xinhua

20. What next?

21. What to watch out for The rise of China’s megalopolises is sustainable, but subject to risks Mismanagement of hukou reform Energy and water supplies Financial capacity of local governments Social unrest But these urban agglomerations will be central drivers in China’s rebalancing towards consumption

22. What next? Questions?

23. EIU reports on China Download our free report on China’s megalopolises: http://www.eiu.com/megalopolis You can also download other recent white papers from the EIU by visiting the Special Reports section on our website: http://www.eiu.com/landing/special_reports

24. Thank you. Contact for more information: Coralie Thomson Senior Marketing Manager Economist Intelligence Unit coraliethomson@economist.com +852 2585 3839