Qingdao, a second-tier city in Shandong province. (Photo/Xinhua)
The cost of living in second-tier cities in China increased sharply last year, according to Mercer, a multinational HR and financial consulting company, whose survey showed expatriates in the country now need to spend more to maintain their standard of living and that companies are also facing increasing labor costs.
Cities such as Qingdao, Tianjin, Shenyang, Nanjing and Chengdu entered the world's top 100 most expensive cities on Mercer's ranking this year. The survey charted 241 cities in the world over a 12-month period starting from March last year. The surges in the ranking of the cities can be attributed to rising accommodation costs, the appreciation of the renminbi and inflation, according to the Shanghai-based First Financial Daily.
Rent increases in second-tier cities has increased inflationary pressure, causing the cost of living to grow faster than in the largest cities such as Shanghai and Beijing, said Zhang Shidong, the head of the company's Beijing office.
The ranking uses the city of New York and the US dollar as its base and placed New York at No.33 and Los Angeles at No.68. A Mercer staff member said the cost of living in China's first- and second-tier cities has now exceeded US cities. Expatriates have to spend more in these Chinese cities if they desire to maintain the standard of living they would have in New York.
The rising living costs have created pressures for foreign companies in China. Foreign direct investment in the country has been in steady decline since November last year. The number of new companies set up by foreign businesses decreased by almost 14% year-on-year and their investments also showed a 2.4% decline between January and April this year, according to China's Ministry of Commerce.
The decline is due to slower global economic growth and the weakening competitive edge of the country's business environment caused by rising costs, said Shen Danyang, spokesman for the commerce ministry. Over 80% of American businesses in China say rising labor costs have affected their operations, according to AmCham China's Business Climate Survey.
However, most of the foreign-funded companies are still positive about the country's economic outlook and their operations in first and second-tier cities have fared well enough that they are unlikely to withdraw from the China market in near future, according to the First Financial Daily.
Shen Danyang 沈丹陽
Zhang Shidong 張世東