The rich cities set to drive the world economy

China’s influence on pulling the world’s economic centre of gravity east cannot be overestimated. But, as Leon Walker argues, a host of other rich cities will help drive the world economy come 2025 too

You could call it the 600 Club. The world’s economic power is concentrated in urban areas, with the countryside a bit-part player. Around 600 cities account for about 60% of world gross domestic product (GDP). And that won’t change any time soon.

By 2025, the 600 Club will still provide two-thirds of World GDP – but its composition will change. As newly-industrialised countries and less economically developed states continue down the path of economic progress, the list is set to take on a distinctly more southern and eastern flavour. That’s the key forecast from a 2011 study released by think tank the McKinsey Global Institute.

So what are the numbers behind this developing-world charge? In 2007, the 380 or so first-world cities named in the current 600 Club (C600) accounted for about 50% of global GDP, with the 220 cities from the developing world contributing just 10%.

But the McKinsey study predicts that, by 2025, some 136 new cities – all of them from the developing world – will have entered the C600. To make space, one in every three developed-world cities will have to give way, and lose their place in the Club.

How China will lead the world’s richest cities

China’s economic growth has been the background music to world affairs in the new millennium – and the country’s influence on pulling the world’s economic center of gravity east cannot be overestimated.

According to a different study in 2009 by McKinsey, by 2025 China will have 221 cities with more than 1m inhabitants – compared to 35 in Europe. By that date, the world’s most populous country will also be home to 23 cities of five million or more.

Guangdong province, which lies directly north of Hong Kong on China’s south coast, is the country’s most populous and rich province and, according to Chinese government figures, had a GDP of $838bn, or roughly one-tenth of the national GDP in 2011.

By 2025 the region will be home to no less than four cities with over 10 million people in an area known collectively as the Pearl River Delta Mega City. Guangzhou, the region’s capital, and current and future largest city, will be home to 14m people.

Guangzhou is the region’s manufacturing hub and is home to a dedicated economic and technological development zone. Beginning in 2016, Honda will start building its Acura car in the city.

According to McKinsey the four major Guangdong cities will have a collective GDP of around $1.8tn by 2025, twice that forecast for the veteran world city of London by the same year.

The rich city of the future: Riyadh, Saudi Arabia

Abu Dhabi may have its mega-constructions and Dubai its indoor ski slopes but, come 2025, the real economic powerhouse of the region will be Riyadh.

Saudi Arabia’s wealth is derived from oil – but the city is fighting to diversify its economy with projects including the 32m sq ft King Abdullah Financial District development. Plans are alreadyin place to upgrade the city, with an $800m investment recently agreed to build a new metro system.

The EIU named it as the one of most improving cities in its city competitiveness ranking, forecasting it to move up 11 spots from 2012 to 2025.

The Olympic effect: Sao Paulo, Brazil

Brazil has been developing rapidly since the start of the new millennium and – with the country hosting the World Cup and the 2016 Olympic Games in the next few years – Sao Paulo, currently the world’s 10th richest city, is set to jump to number six.

The Economist Intelligence Unit recently named the city as the most improving city from in its 2025 economic competitiveness forecast.

The bigger apple: New York City, United States

Hardly a ‘new megacity’ – NYC is more the prototypical modern megalopolis. The Big Apple is worth a mention because, unlike most of its current developed world megacities peers, New York will still refuse to sleep over the next decade.

It will see its GDP grow by roughly $400bn – a similar increase to that shown by any of the new Chinese super cities.

Leon Walker is a contributor to Accounting Technician magazine.