Since I started this “business blog”, I started to read and comment on other, established blogs out there. In general, I feel daunted. There are a lot of good blogs out there which are well established. One of my favorites is China Law Blog, which BTW is about more than just law in China. Dan Harris wrote a post on that blog about a post on another blog giving advice to invest in “Second Tier Cities”. He then put links to other posts about this subject going back to 2006. Maybe he was being a little bit snarky with that… as if he was pointing out that this theme has been going around for the last 4+ years. But no matter… I like snarky-ness.
I left a response comment about the situation in Suzhou (already expensive, drive to change to service industries / clean tech, The Train, etc). After I wrote my comment, I thought of two things. First… when am I going to move to Xiamen / Qingdao / Dalian / a city with better food and a beach? No offence to my Suzhou friends. But I like beaches and I like food with more “substance”.
Second, I thought about what his post (and the posts he linked to said) about talent in “second tier” cities. The perception is that good talent is hard to get, but at least it will be more stable. I disagree with the latter point. Good talent in smaller cities will have more sense of their worth. They may be less stable; especially critical mid-level management. Of course, this depends on just how “good” you need your management level to be, and that probably depends on what the company produces. I wrote in the comments;
If you need talent, then Shanghai and Beijing still have a lot to offer. If cost was the main factor, you can go to a lot of places. But then there are the lifestyle issues; will an expat GM wish to stay in a muddy town in the middle of nowhere ? Will your R&D Director wish to travel and extra 6 hours from Shanghai to get to the factory town after a 15 hour plane trip?
Now this started me thinking about the Am-Pharm case study (final installment to be release on Monday). Their factory (the real-life company which the case is based on) is located an hour outside of a 2nd Tier city. They have a full expat upper-level management team, but they have virtually no one in the middle who can lead the company to implement. No one besides “Hiro Protagonist”, who will probably be fired soon. Is this situation just because their HR Manager is – to be frank – incompetent? Does the fact that the company is outside of a Tier 2 city influence its ability to get a stable, high-quality mid-level management level? I believe the answer to both of these questions is “yes.” And the results are devastating.
6 Responses to “Second Tier Cities…like Suzhou”
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Didn’t do it to be snarky. I hate snarky. Did it to show that the trend towards second tier cities has been going on for a long time.
OK. Snarky may not have been the right word. I’m sorry about that characterization. On the other hand, I think that, as you pointed out, this trend is old enough not to need attention. The second tier cities mentioned there are probably about as expensive as Shanghai suburbs, like Jiading (although I bet Jiading is expensive now). What about the good “third tier” cities?
I agree with you that the trend is old enough not to need attention, but it does. I think you would be shocked at how often American companies just assume they need to start out in Shanghai or Beijing, even on projects/businesses that absoutely do not need to be in either city. Many times, it is only after they do their research and get shocked by prices (particularly for retail space) in those cities do they consider the second tier at all. You keep focusing on the Suzhou type cities which are quite expensive, but places like Qingdao, Dalian, Tianjin, Chengdu, Xi’an, etc. are still considerably less than Shanghai-Beijing-Shenzhen. I am sorta of the view that third tier cities do not make sense/are too difficult for the company new to China. But yes, they absolutely can make sense for the company that already has a good understanding of China.
BTW, I’m liking your blog and I’ve bookmarked it.
Wow. I’m honored. I got to say that when I looked at your blog and a few others, I almost decided not to create a blog… it just seems that there are several blogs that are soo good…what can I do that’ even in the ballpark?
Right now, part of my plan is to put up some case studies and discussion questions, and also do the “blog thing”, which is to add my comments into the discussions of others. But what I really need to add is truly original content. My goal is to try to add some piece of original work each week; not just an off-shoot discussion from another blog or news-article.
BTW, my “China feed” now include your blog (chinalawblog), china/divide, China Translated, All Roads Lead to China, and Silk Road. And Chinasmack for fun.
Don’t even think that way. There’s always room for another good blog and what you will bring to the table is your own way of looking at things and your own interests.