Many of you know that Chinese cities have always been competing against each other in GDP development, foreign direct investment, liveability, and talent.

Different incentive schemes have been launched over the years to attract good talent to settle in respective cities. Many cities offer top tier talent direct access to Hukou – local household registration allowing residents to live in the city indefinitely and, more important enjoy all the social welfare benefits including housing, education and healthcare.

Subsidies, houses!

This spring, the competition seems to have suddenly intensified:

In January, the government of Nanjing, an eastern city of 8 million, lifted housing purchase restrictions for ‘good talent’, allowing them to get a loan of up to CNY1.2 million (US$190k) from the pension fund.

The governments of other provincial capitals quickly followed. Changsha (7.5 million residents), Jinan (6.8 million residents) and Zhengzhou (9.6 million residents) all rolled out similar policies. The incentives range from 20% discount on market price for housing to US$20,000 one time cash subsidies.

Xi’an’s aggressiveness

The most aggressive one is undoubtedly the western city of Xi’an, an ancient capital with a population of 8.7 million.

On 16th of April, its Public Security Department, which manages the household registration system, announced that since the beginning of 2018 more than 300,000 qualified individuals have been issued Hukou of Xi’an city.

The only thing you need to be issued a Xi’an Hukou is proof of a university degree. As this joke says:

Mr X just arrived in Xi’an to visit a friend. At the railway station, he was stopped by the local police. “Do you have a university degree?” asked the policemen.

Mr X, while very puzzled, nodded. He was afraid of arrest deportation, as in the past it was a common tactic by local governments to get rid of ‘unqualified’ people.

The police ‘arrested’ him anyway, sending him to the police office and gave him a piece of paper “Sign this, and from now onwards you are officially a Xi’an resident.”

Xian railway station – great gateway for talent

Xi’an’s policies are undoubtedly very attractive. The city is home to many universities, whose graduates typically move to Beijing or coastal cities after graduation. Now they realise that Xi’an suddenly becomes more attractive as they can enrol their kids to local public schools, buy a local apartment without limitation, and get local health insurance.

What is behind all these craze

A couple of reasons.

First, it has genuinely become harder to attract talent in an organic way, as more and more cities now become reasonable choices; and because of more than three decades of one-child policy, the availability of young talent is not really growing that much. Naturally by the law of supply and demand – the competition for talent will naturally become fierce.

Second, precisely because of the dwindling birth rate, urban population of China is ageing fast. It is vital for the local governments to import fresh blood to keep the economy going, and housing price stable.

One more plausible reason is probably the bigger the city is, the more attention in economic planning it receives from central government.  The cities mentioned above are all provincial capitals with a population of roughly between 7 to 10 million. In comparison, Beijing has 22 million residents, Shanghai 25 million, Guangzhou 15 million, and Chongqing a whooping 30 million.

Distribution of megacities in China

Density rules

The governments all started to believe that the huge economic benefits of population density overpowers the accompanying environmental and societal problems. Especially for business models such as food delivery, ecommerce and mobile financial services, the big population with consumption power is really the key winning ingredient.

In Southeast Asia, we also see a fight for talent – as Singapore is now feeling the heat: many of the good talent from Vietnam, Indonesia and the Philippines now prefer to join the rapid development in their home country rather than staying in comfortable Singapore.

Good thing that Singapore does not need to play with size – it will not reach 10 million people very soon, but its role as a financial, trading, logistics and talent hub will probably remain for years to come.

In terms of the prospects of true megacities, Jakarta is probably very promising: the metro area, called Jabodetabek, boosts a population of 30 million – almost the size of the whole of Malaysia.

Only if the traffic was any better.

Jabodetabk has a very high population density

Thanks for reading The Low Down (TLD), the blog by the team at Momentum Works. Got a different perspective or have a burning opinion to share? Let us know at [email protected].