Commentary

Unlock Potential of Emerging-Market Cities

According to a new study by McKinsey, a massive wave of urbanization is propelling growth across the emerging world. This urbanization wave is shifting the world’s economic balance toward the east and south at unprecedented speed and scale. It will create an over-four-billion-strong global “consumer class” by 2025, up from around one billion in 1990. And nearly two billion will be in emerging-market cities. These cities will inject nearly $25 trillion into the global economy through a combination of consumption and investment in physical capital.

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Yet few business leaders focus on the importance of cities when establishing growth priorities, says the report. In a recent survey, the study found that fewer than one in five executives makes location decisions at the city (rather than country) level. Few executives expected this approach to change over the next five years, and more than 60% regarded cities as “an irrelevant unit of strategic planning.” As these new urban-growth zones flourish, there’s a cost to companies that lack a clear view of the emerging landscape, says the report.

Cities Contribution To Global GDP and GDP Growth (2,600 Cities)

City Classification

% Global GDP 2010 ($63 Trillion; Market Exchange Rate)

% Global Growth 2010-2025 ($50 Trillion; Market Exchange Rate)

Emerging market cities

   443 cities in City Top 600

18%

47%

   Other large cities

6

14

   Small cities and rural areas

12

13

Developed market cities

   157 cities in City Top 600

36

17

   Other large cities

12

4

   Small cities and rural areas

16

Source: McKinsey Global Institute, February 2013 (Prediction based on difference in per capita GDP growth rate of countries relative to the growth of the US)

McKinsey suggests that to learn more about 440 largely obscure urban areas that will account for close to 50% of expected global GDP growth between 2010 and 2025, read “Unlocking The Potential Of Emerging-Market Cities” (September 2012). Then browse through an interactive map to find city-specific highlights about these new economic hot spots.

To access this report, please visit McKinsey here.

 

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