Changsha, the capital city of Hunan province, has seen rising business attractiveness, according to a recent report evaluating the business environment of 35 large- and medium-sized cities in China.

The city ranked ninth in terms of business environment, up 11 places from last year, according to a report by the Academy of Greater Bay Area Studies, which assesses the business environment of 35 cities based on indicators including soft environment, infrastructure, business cost, market environment, social services, and ecology and environment.

There have also been much shuffling in the rankings elsewhere: Shenzhen replaced Guangzhou at the top, and Shanghai rose to second from fourth, switching places with Beijing. Changsha made the unexpected leap from 20th to ninth.

“Generally speaking, the first-tier cities are still taking the absolute advantage in terms of business environment while some second-tier or third-tier cities are also catching up,” said Deng Honghui, executive president of the Academy of Greater Bay Area Studies. “Among them, Changsha proved to be a strong performer.”

The top 10 cities are in order: Shenzhen, Shanghai, Guangzhou, Beijing, Chongqing, Chengdu, Nanjing, Hangzhou, Changsha, and Wuhan. 

Changsha made the leap due to its strong performance in the soft environment and business cost indicators, said Geng Yanbing, the project director at the academy. The city’s soft environment surged to second from 31st last year, ranking only behind Shenzhen. “Its huge improvement in soft environment is related to several leading indicators including the growth of registered companies, investment, and population.”

Data shows that by the end of last year, the total number of market entities per 1,000 people in Changsha reached 103, while the figures for Beijing and Shanghai were both fewer than 100. Moreover, the number of new market entities per 1,000 people in Changsha in 2017 was 23, ranking eighth nationwide.

Another major increase was Changsha's permanent resident population, which grew by 272,900 in 2017 according to the report, behind only Shenzhen, Guangzhou and Hangzhou. The increase was twice the size of Wuhan and Chengdu, and three times that of Nanchang. With an investment growth rate of 13.1 percent, the city was among the highest in the country in this indicator as well.

Last year, Changsha has also made its way into the 1 trillion yuan (US$145 billion) GDP club, reaching over 1.05 trillion yuan, according to the report.

“The city’s increase in market entities, investment as well as population flow is strongly correlated with its relative low housing price and investment cost,” said Geng, who pointed out that it only took about seven years for an average couple to buy a house there. He said the average couple in Wuhan, Zhengzhou, Tianjin, and Qingdao would take twice that long, and three times as long in Hangzhou.

Deng said Changsha’s surge as a “new first-tier city” and to a higher position on the business environment ranking is partly attributable to the municipal government’s efforts in helping companies to reduce operation costs, improving social credit, building a level playing field, as well as creating new opportunities.

In recent years, the government launched a three-year campaign to improve business environment as well as campaigns to ease companies’ burden, regulate the housing market, attract talents, and streamline administrative procedures.

There’s also room for improvement, Geng said, not only in indicators related to business environment but also in infrastructure. Major indicators of infrastructure sophistication including freight volume, public transportation, and roads are still way behind those of Beijing and Shanghai.

Geng said that Changsha should put in major efforts toward breakthroughs in areas including infrastructure development, logistics, trade facilitation, cross-border e-commerce and tourism, as well as increase spending on technological development.

“Young people give dynamism into a city and are the ones that create a future,” said Geng, noting that Changsha has more room for attracting talents with a permanent resident population of only 7.9 million as of the end of 2018.

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