03-08-2025
What are China's most dynamic cities? New report gives surprising answer
China's most dynamic local economies are no longer metropolises like Beijing and Shanghai, but lesser-known cities including Hangzhou and Hefei, according to a new report by the Economist Intelligence Unit.
The findings reflect a growing shift in China's economic landscape, as smaller cities emerge as a main engine of growth due to their strength in advanced manufacturing, clean energy and other emerging sectors.
The annual report by the EIU ranks Chinese cities in terms of their growth potential, with the eastern city of Hangzhou – home to e-commerce giant Alibaba, artificial intelligence start-up DeepSeek, and several other major technology companies – topping the list for the fifth consecutive year.
It was followed in the ranking by Hefei – an eastern city known for being a hub for semiconductor and electric car companies – and the southwestern industrial powerhouse of Chengdu.
Shenzhen, often dubbed China's Silicon Valley, placed fifth, while Beijing, Guangzhou and Shanghai all failed to make the top 10.
The results 'capture the rise of manufacturing and the decline of the service sector' in China, economists Xu Tianzeng and Su Yue wrote in the report, as a prolonged property downturn drags down consumer spending and the economy continues to rely on strong production.
Most of the top-ranked cities have benefited from China's advanced manufacturing boom, recording strong economic growth and attracting significant population inflows over the past two years.
According to the report, Hangzhou has made a strong recovery from Beijing's regulatory crackdowns on the tech sector launched in 2021.
'The city has since reasserted its leadership in China's artificial intelligence race, driven by major players like DeepSeek, while also leveraging its strengths in advanced manufacturing,' the authors wrote, noting that Hangzhou has one of the most robust fiscal positions of cities nationwide.
Hangzhou is home to China's 'six little dragons' – a group of high-profile tech start-ups including DeepSeek, humanoid robot maker Unitree Robotics and Neuralink rival BrainCo.
Local authorities in Zhejiang, the eastern province where Hangzhou is located, have put a strong emphasis on supporting hi-tech companies. Last week, the province released a draft action plan for boosting local innovation, which set a target that over 80 per cent of its new listed companies should come from the tech sector by 2027.
Meanwhile, Hefei and Chengdu have both 'made bold, strategic investments in foundational technologies' to drive their development, the report said.
Hefei has invested heavily in CXMT, a major producer of dynamic random access memory (DRAM) chips, which is now preparing for an initial public offering. The company is widely regarded as China's best hope of competing with South Korea and the United States in the global memory chip market.
Chengdu has also invested in the semiconductor company Hygon, a joint venture with US chipmaker AMD.
'These ventures have not only generated substantial returns for the two cities, but have laid the groundwork for broader industrial ecosystems with surrounding cities,' the report's authors said.
They noted that the broader metropolitan area covering the core cities of Chengdu, Deyang, Meishan and Ziyang logged an average growth rate of more than 7 per cent in the first quarter of 2025 – making it one of the country's fastest-growing regions.
Similarly, China's clean energy push is powering significant growth in smaller cities with established manufacturing bases for renewable energy technologies, according to the report.
Xinyu and Yichun in the eastern Jiangxi province, for instance, have seen their growth boosted by rising demand for lithium-rich ores from the electric vehicle and energy storage sectors.
Meanwhile, Jinchang in the northwestern Gansu province recorded an impressive average annual growth rate of 12.9 per cent between 2022 and 2024, as demand for renewable energy infrastructure boosted the city's non-ferrous metals industry.
But smaller cities that are riding high thanks to the green transition also face 'vulnerabilities', the report noted.
'These include exposure to commodity price cycles, external trade shocks and spillover effects from overcapacity rectification in downstream industries,' it said. - South China Morning Post
