The emergence of Beijing as a +100M person mega-city is a pretty awesome story. Some thoughts on where are are and what’s coming next.

The economics of Beijing as a mega-city are already fantastic.

The population of the Beijing-Tianjin-Hebei cluster (also called “Jing-Jin-Ji”) will be +100M people. And the economic output is already about 10% of China’s GDP. So this is already a big deal in terms of people and money.

But it’s going to get a lot bigger. By 2025, the Beijing the mega-city will be the world’s fifth largest urban economy. At that point, it will be larger than London, Tokyo or New York.

Phase I of “Beijing the mega-city” was mostly about infrastructure – and this is now largely complete.

The Beijing-Tianjin-Hebei story has thus far has been a story of infrastructure building (i.e., lots of roads, rail, bridges, etc.). For example, Beijing’s seventh ring road is now under construction and will extend the city directly into Hebei. This physical integration of Beijing-Tianjin-Hebei  is largely complete. It is one gigantic, inter-connected mega-city.

But if Phase I was about building hardware, Phase II is going to be about the software. The story is going to shift from roads and trains to government policies, logistics systems, company operations, local services, family and culture, and so on. And this should be much more interesting.

Photo by Cory Doctorow, Creative Commons license with link here.

Phase II will initially be about the increasing concentration of Fortune 500 companies in one place.

Beijing already has +100 large company global headquarters. This is more than any other emerging market city, and sixth in the world (ahead of Seoul, Chicago and Los Angeles).

But as this company concentration increases (and as companies find it increasingly seamless to operate between Beijing, Tianjin and Hebei), the interactions between companies in Beijing will increase exponentially.

This is important. People are social animals. Putting so many top companies in close contact with each other will have lots of cumulative and synergistic effects. Think Hollywood, Wall Street, and Silicon Valley. Beijing is going to have a massive concentration of top companies – increasingly interacting with each other.

Phase II will also be about Beijing’s huge and growing local consumer market.

These consumer numbers are well-known. But it is worth repeating them quickly. By 2025, the Beijing the mega-city will have over 7 million households earning over US$20,000 per year. That will make it third or fourth on the global rich cities list. So this mega-city is going to be a massive consumer market in itself.

However, Phase II is also going to create big problems, including some we have never seen before.

We have never seen +100M person mega-cities. This is uncharted territory. Nobody really knows how these mega-cities are going to work. But for sure, there are going to be ongoing challenges for the local government to grapple with. This will include everything from how many police to have to what to do with all that sewage.

China’s “rolling police” for urban settings.

(photo by ross_tt, creative commons license with link here)

We are also going to see new types of problems. One example of this is the increasing number of migrant workers in Beijing. If current trends continue, over 40% of China’s urban population nationwide will be undocumented and technically “illegal” by 2030. For Beijing, this could mean literally tens of millions of migrant workers living in the cities but outside the system. This is not a small problem.

Ultimately, these mega-city clusters are the future of China. You can’t really build a >50 million person city as it becomes unworkable. Pollution, traffic, population, and housing pressures become increasingly problematic beyond a certain size. So creating hub-and-spoke systems around major cities (i.e., integrated mega-cities) like Beijing makes sense.

But the real story of Beijing as a mega-city is just beginning, now that the roads have been built. It should be fascinating.

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I regularly write about the fight for rising Chinese consumers. If you would like to read my regular posts, please click ‘Follow‘ or send a connection request.

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About: I am a Professor of Investment at Peking University Guanghua School of Management. I am also an investor and former executive / slave to Prince Alwaleed. My newest books are “The 1 Hour China Book” and “The 1 Hour China Consumer Book“. Read a sample chapter here.

Top photo by Jakob Montrasio, Creative Commons license with link here.