Large cities have a natural advantage when it comes to attracting investment, but what can smaller cities rely on? While cities may appear to be clusters of skyscrapers, their essence lies in the concentration of industries, businesses, and talent; the alignment of supply and demand drives the flow of resources. This “flow” is what brings a city’s appeal to its peak.

Third- and fourth-tier cities, however, lack high-tech industries and suffer from inadequate supply-demand infrastructure. They struggle to attract talent and are even at risk of having their best employees poached. It goes without saying that attracting investment is no easy task. For smaller towns, they cannot afford to be “picky” about projects; they are simply grateful when any company comes to investigate. As for industrial compatibility, it is rarely considered—or perhaps they simply lack the capacity to consider it. Over time, this leads to a situation where they fail to attract the businesses they should be bringing in, and instead end up subsidizing those that leave. Ultimately, cities should not all look the same; the development models of major cities are not suitable for small cities to replicate. Therefore, when it comes to positioning, planning, and investment promotion, third- and fourth-tier cities do not necessarily need to follow a “high-end” approach; instead, they should embrace a “down-to-earth” philosophy. The key lies in whether they have pillar industries. Even “small but specialized” industries can bring a certain level of development to the region.

Instead of receiving an infusion of vitality,
they have bled dry

Currently, third- and fourth-tier cities find themselves in a relatively awkward position: their resources have been largely “siphoned off” by major cities, while national policies “favor” county-level cities. It is unrealistic for them to compete with first- and second-tier cities on their own merits, yet they cannot expect to be “looked after” if they simply sit and wait.

Consequently, they face a dilemma where standing still means falling behind, and even slow progress amounts to regression. As is well known, most advanced manufacturing and high-tech industries demand extremely high standards for talent and industrial support systems. Yet, top-tier technology, upstream and downstream supply chains, and customer resources are concentrated in first- and second-tier cities. Some third- and fourth-tier cities lack competitiveness; their supply and demand networks are essentially fragmented. If even a single component is missing, products cannot be produced or distributed. At the same time, homogenized competition has emerged in terms of industrial transfer and industrial positioning. From the perspective of industrial division of labor and coordination, “what you have, I have too,” failing to create a synergistic effect where 1+1>2. Instead, this has resulted in a “same-city” investment attraction effect where 1+1=2. Every industry comprises dominant, foundational, and supporting segments, each with its own industrial chain relationships. There exists a vast network of upstream and downstream supply and auxiliary activities that are interdependent and mutually constraining, forming diverse horizontal and vertical industrial chain linkages. Some argue that the fundamental reason for the obstruction of industrial coordination and division of labor in third- and fourth-tier cities lies in limited transportation conditions, weak economic ties, and a lack of connecting links or transitional zones between regions, leading to a “central collapse” of industrial chains. To a certain extent, this logic holds some merit. After all, where roads lead, progress follows. Transportation is an indispensable factor in gauging a city’s development potential. In recent years, high-speed rail and subway networks have spread across the country like a spider’s web; whoever secures a head start in this round of infrastructure development will hold a competitive advantage for the next decade or two.It seemed that a city would lose face if it didn’t build a few subway lines, and was destined to be at a disadvantage in future regional economic competition. However, relying solely on transportation infrastructure to attract businesses and drive economic growth is not a sound strategy. Transportation routes are like veins inserted into a city; they can indeed deliver a “blood transfusion,” bringing with them the flow of people and goods. But veins are two-way. They can not only deliver blood but also drain it. For cities that were already capable of attracting projects, the convenience of transportation expansion is merely icing on the cake. But for cities experiencing population outflow, it is the straw that breaks the camel’s back. Therefore, third- and fourth-tier cities should select transportation modes that align with their actual economic and commuting needs.

Forge Their Own Path
Focus on Their Own Industries

Do third- and fourth-tier cities have a chance to stand out?

Yes, of course there is—it’s time for them to carve out their own path…

Today, China’s development landscape presents a stark contrast of “polar opposites.” On one hand, urbanization rates in major cities have reached saturation; on the other, the development of third- and fourth-tier cities and county towns lags far behind.

It is against this backdrop that the General Office of the CPC Central Committee and the General Office of the State Council issued the “Opinions on Promoting Urbanization with County Towns as Key Carriers.” One of the core principles is to reasonably determine development paths for different types of county towns.

The same principle applies to the development of third- and fourth-tier cities. Industries must possess a certain scale, distinct characteristics, and competitive advantages to sustainably drive local development.

Yiwu, a model of development for typical third- and fourth-tier cities, is neither a border town nor a coastal city, nor does it rely on major metropolises. Starting from the small commodities sector, it has gradually developed into one of Zhejiang’s four major metropolitan areas. According to census data, Yiwu’s permanent resident population has increased by 600,000 over the past decade, representing a 50% growth.

Huludao is another such example, boasting the legendary “never-ending swimwear” industry. Its swimwear sector gained national fame for its early days of “sewing machines underfoot and small-scale trading with baskets.” Statistics show that one out of every five swimsuits produced globally comes from Huludao.

In contrast, some regions pursue “high-end, cutting-edge” industries and attract high-tech enterprises, which is actually unrealistic. As soon as they hear about major projects or large-scale investments, they rush to launch them without proper discernment or evaluation. Ultimately, this leaves behind a string of abandoned projects, and precious development opportunities are missed.

Those so-called “ghost towns” all defy the laws of urban development. In the future, urban clusters will inevitably form around core cities, with small and medium-sized cities integrating into these clusters. Those who can best identify small-scale industries suited to the urban cluster will thrive.

The era of isolated development is over
The era of coordinated development has arrived

Rome wasn’t built in a day, and the development of third- and fourth-tier cities won’t happen overnight either. Yet many cities don’t know what they truly need. It’s like a business that doesn’t know who its customers are. They naively believe that a beautiful master plan, large-scale projects, and good infrastructure are the three key elements of urban development. In reality, this is not the case—especially when it comes to policy, which serves merely as a booster for urban development, not its primary driving force. Material assistance is ultimately short-term.The fundamental catalyst must lie in the development of distinctive industries. Today, investment promotion and industrial development emphasize a sense of community. From the national and provincial levels down to cities and even county-level cities, everyone is working toward a single goal: breaking down barriers to build a unified national strategy. This approach enables the interconnection of infrastructure, the sharing of supporting resources, synchronized industrial upgrading, and the joint use of spatial resources, while also facilitating industrial relocation and transformation.More importantly, the limitations of third- and fourth-tier cities are being overcome. Under top-level planning, regional complementarity and mutual benefit are being realized. Take Shenzhen as an example: its development bottleneck lies in spatial constraints, as a lack of land hinders its expansion, while cities like Dongguan and Huizhou face bottlenecks in industrial transformation and upgrading. Building on the coordinated development of the Guangdong-Hong Kong-Macao Greater Bay Area, cases like Huawei’s relocation to Songshan Lake will become increasingly common.To a certain extent, Songshan Lake has become an exclave of Shenzhen, while Huawei’s arrival has provided immense value to Dongguan’s economy, industries, and talent recruitment. Clearly, this exchange of resources confirms the formation of a “unified large market.” This unified landscape not only facilitates investment promotion and market expansion while improving industrial chains but also breaks down barriers to regional development.

Conclusion

No region is an isolated island, nor is any city cut off from the rest of the world. Third- and fourth-tier cities have limited resources, industries, and talent. They must assess the situation and choose the most appropriate direction, adhering to specialization, distinctiveness, and refinement. By focusing on supporting and developing one or more pillar industries, they can stand out among the multitude of cities.