China’s economic growth is rapidly spreading out from the main cities like Beijing and Shanghai into the hinterlands, where the middle class is taking off. In a report last year, the consulting firm A.T. Kearney said 75 percent of the middle market is expected to be in tier-two and tier-three cities by 2017.
These cities are “small” only by the standards of a country with 1.3 billion people. For example, Wuhu in eastern China has 2.3 million people and Maoming in the south has 6.8 million, providing a strong consumer base as incomes rise.
In response, retailers are pushing into the hinterlands, including American coffee chain Starbucks Corp. and French store Carrefour SA. Carrefour, the world’s second-largest retailer after Wal-Mart, is the largest foreign retailer in China.