The number of megalopolises in China is set to more than double by 2020, due to large-scale internal migration and government initiatives encouraging urbanisation, according to the Economist Intelligence Unit’s (EIU) latest report. Urbanisation in China will primarily occur inland, with a large number of the cities approaching megapolis status located in China’s western and central provinces. The EIU report predicts that the number of megalopolises will rise from three in 2000 to 13 in 2020.

“If we look at 2020, one-third of China’s urban population will live in the megalopolises,” said Duncan Innes-Ker, China analyst at the EIU. “We are seeing a growth story that is increasingly led by the inland provinces. The emergence of these cities has been amazing, [and] the rate of [the] population increase over the past decades has been phenomenal. It is a good time to be talking about urbanisation because in 2011 China, for the first time, became a majority urban country with 50% of the population living in cities.”

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Defining megalopolises as cities or groups of cities with a combined population of more than 10 million people, the EIU report expects that growth in China’s hinterland will outpace growth in the developed eastern coast. “In 2000, there were three mega-cities cities, Beijing, Shanghai and the Shandong peninsula cluster,” said Mr Innes-Ker. “In 2010 there were another three mega-cities coming into the picture, and over the next decade there will be a new cluster emerging at the centre.”

Yet the EIU report maintains that there will be significant differences among the megalopolises, as some cities will grow faster than others. Additionally, while inland cities are set grow faster and have younger populations, the older cities along China’s eastern and southern coast will remain the established financial centres.

“Beijing, Shanghai and Shenzen are going to remain richer than the other cities, but they are also growing [much] slower, so there will be more attention paid to the inland cluster that emerges,” said Mr Innes-Ker. “The dynamics of the new clusters will be different from those of the older established cities. They [will] be younger, poorer and their migration [will be] within the regions rather than from other parts of China.”

Over the past decade, China’s government launched a large-scale drive to accelerate growth in China’s western and north-eastern provinces, keenly aware of the need to diversify the country’s sources of economic growth and address gaps in regional development. The rapid growth of China’s inland provinces is a culmination of state-led efforts to enhance regional development.

“Investments in infrastructure are now paying off,” said Mr Innes-Ker. According to the EIU, the western provinces outperformed the rest of the country in 2011, as aggregate GDP growth reached 14.1% compared to a 10.5% average on the eastern seaboard. Against this backdrop of urbanisation, the EIU’s report forecasts an increase in household income and consumption within China’s western and central provinces.

As China’s growing consumer class becomes concentrated within the megalopolises, more retail markets will emerge and this will create opportunities for retailers. “The interior is where the growth will be in China, and from a company perspective this will be important,” said Mr Innes-Ker. “The emergence of the middle class is dramatic [as] urban disposable income per head is [now] $5000, and the number of cities with more than 50% of their population surpassing this [income] level will grow rapidly.”