New York, London, Paris, and Tokyo remain today's leading cities, but an analysis of key trends in emerging cities suggests that Beijing and Shanghai may rival them in 10 to 20 years.
Macro forces continue to have an impact on the global influence of cities. Political power is rotating back from West to East, and with economic drivers having shifted from agrarian to industrial to information-based, more people live in cities than in rural areas. While New York, London, Paris, and Tokyo still rank among today's top cities, it appears that Beijing and Shanghai may become significant rivals in the next 10 to 20 years.
These are among the highlights of the 2012 Global Cities Index (GCI), a joint study performed by A.T. Kearney and The Chicago Council on Global Affairs. In addition, a panel of academic and corporate executive advisors informed and challenged the study results. We've expanded this year's study; in addition to classifying the current global influence of 66 cities, we have also developed an Emerging Cities Outlook (ECO) to project which emerging-market cities may eventually rival the established global leaders for dominance.
Figure 1 summarizes the 2012 results, along with the rankings from our 2008 and 2010 findings of major world metropolitan areas. (The censorship metric added in 2010 affected the positions of several emerging-market cities.) In the first section of this report, we explore the results and implications of the 2012 GCI rankings. The second section summarizes the results of our Emerging Cities Outlook, which analyzes the strengths and weaknesses of cities in developing markets by examining the rates of change and key factors that will affect their ability to capitalize on future globalization trends (see Appendix: About the Study).
Insights from the Global Cities Index
The Global Cities Index, first released in 2008 and again in 2010, is unique in that it measures global engagement of cities across five dimensions: business activity, human capital, information exchange, cultural experience, and political engagement. The GCI ranking is a much more comprehensive measurement of a city's global influence versus other rankings that usually focus only on business. Analyzing the results of this year's study, and comparing them to previous years, offers the following insights:
Stable at the top, volatile in the middle. Despite the financial turmoil of the past few years, New York and London have consistently led the rankings in all three editions of the Global Cities Index. Paris and Tokyo, although they alternate positions this year, are always far above the rest of the top 10, while changes in ranking among cities in the middle section of the GCI are more volatile—primarily because of the proximity of these cities' scores. This year, for example, we see Boston (15) rising four places and San Francisco (17) falling five places, although the changes in their absolute scores are not as dramatic. Likewise, although Brussels and Washington replace Sydney and Singapore as top 10 cities, their absolute scores remain quite close as shown in figure 1.
Asia is here to stay. All editions of the Global Cities Index have featured at least three Asian cities in the top 10, demonstrating the stability of Asia's relevance on the world stage. In addition to Tokyo, other Asian cities, including Hong Kong, Seoul, Singapore, Beijing, and Shanghai, represent up-and-coming metroplexes that will further accentuate the ascendance of Asian cities.
Germany: distributed leadership. As a country, Germany is a strong economic performer and the only European country with three cities ranking in the top half of the Index. On the other hand, no German city has ever been ranked among the top 10 global cities. One of the linchpins of the Global Cities Index has been the notion that globalization represents a transfer of power from national states to a network of global cities. The world today is more about cities than countries, and a place like Seoul has more in common with Singapore and Hong Kong than it does with smaller Korean cities (see sidebar: Relational City Thinking). In this model, Germany is an exception, in that Berlin (20), Frankfurt (23), and Munich (31) represent a network that should drive continued national success.
BRIC means business. Cities in the BRIC countries—Brazil, Russia, India, and China—are working their way to the top of the rankings at varying paces. However, when only business activity is considered, the top BRIC cities are clearly on the rise. For example, Beijing (6) and Shanghai (7) both rank among the top 10 for business activity, while Mumbai (19) shows the greatest business activity improvement among the top 35 cities, jumping 11 positions. This rise is neither sudden nor surprising as BRIC cities also performed well in the business activity category in previous studies. Rather, it demonstrates a compelling trend: BRIC cities are on the rise because of their strength in business activity rather than other dimensions that make for a well-rounded global city, such as culture, human capital, and political activity. It's not hard to imagine that this strong performance in business activity will motivate future development in the other dimensions.
Information is flat, politics concentrated. Of all the dimensions that drive differences among cities, there is less variance in information exchange and more in political activity. The gap between top cities and average ones in information exchange is relatively small as access to broadband and TV news, the presence of news bureaus, and lack of censorship are distributed fairly evenly around many global cities. The often heard statement that technology makes the world flat appears to be true. (The Appendix on page 10 indicates how we updated this metric for 2012.) On the other hand, the biggest gap between top and average cities comes in the political activity dimension, where just a few cities, chiefly—and not surprisingly—Washington, New York, and Brussels corral the majority of world action in international organizations, embassies, think tanks, and conferences.
The Emerging Cities Outlook
As global economies and societies become increasingly integrated, emerging cities have an unprecedented opportunity to rise in power and influence. Some up-and-coming cities are likely to take advantage of developments in communications and technology, and the increasing mobility of people and capital, to move quickly toward the top. Others may struggle.
Which ones will head in which direction? To seek answers, in this year's study we developed a new analysis for emerging cities. The Emerging Cities Outlook gauges each city's rate of change by measuring factors that will affect the future of two dimensions in our rankings: business activity and human capital. We focus on these two dimensions because we believe they will drive a city's capacity to attract, retain, and generate the global flow of ideas, capital, and people. We look at the rate of change because it can be an indicator of future movement rather than current status. And we capture that change using factors that reflect both strengths and vulnerabilities.
Figure 2 maps the strengths and vulnerabilities of these emerging cities: In the high-potential quadrant (upper right), a city's strength score is higher than its vulnerability score, indicating cities well poised for the future. Those in the status quo quadrant (lower right) have low strength and vulnerability scores, suggesting relative stability. By contrast, cities in the uncertain quadrant (upper left) have high scores in both, which could lead to large positive or negative changes, while the vulnerable quadrant (lower left) reflects the potential for future struggles. We analyze these results in more detail, exploring the likely rise or fall of the world's leading emerging market cities over the next decade or two.
Figure 3 presents results by dimension for these emerging cities. Insights drawn from this analysis include the following:
Chinese cities poised for improvement. A thriving economy, a growing middle class, and infrastructure investments are likely to continue pushing Chinese cities toward a larger global presence. As expected, Beijing and Shanghai have the highest strength scores in our analysis, and three other Chinese cities are grouped in a second tier. Of all emerging cities worldwide, those in China may be the most likely to move up in future rankings. (With a strengthening healthcare system, Beijing may be the likeliest of all.) One caveat, however, is that as China improves its small-particle pollution reporting, the outlook for Chinese cities could be impacted.
Indian cities' potential. Indian cities are also in the high-potential quadrant, but they show a more balanced positioning of strengths and vulnerabilities. Kolkata, New Delhi, Bangalore, and Mumbai are grouped near the center of the chart as trends in their economic indicators still lag behind those of Chinese cities. Indian cities may thus rise in future rankings, although not as quickly as Chinese cities, where the ease of doing business is improving more rapidly.
African cities will struggle to gain global presence. Weak economic development and significant vulnerabilities are likely impediments to African cities that seek relevance on the global stage. Nairobi and Lagos are among the most vulnerable cities in our analysis. A growing middle class gives Johannesburg a comparatively better position, placing it closer to the center of the quadrants in figure 2.
Latin America: cities in all quadrants. Thanks to improvements in infrastructure and reductions in instability and corruption, Bogota, Colombia, is the one non-Asian city in the high-potential quadrant. However, other Latin American cities seem likely to exhibit different future behaviors. For example, Brazil's Sao Paulo and Rio de Janeiro appear poised to maintain their global positioning, with balanced opportunities and risks. Caracas, Venezuela, with its economic problems, increasing instability and corruption, and deteriorating healthcare system, occupies a more vulnerable position.
In general, these analyses reflect broad social and demographic trends, as people migrate from rural to urban settings and from agrarian to industrial and information-based economies. The results further reflect the extent to which these trends are accelerating outside Europe and North America, where they began decades ago.
Opportunities and Risks Abound
Globalization presents new opportunities and risks to cities and businesses everywhere. As the third iteration of our Global Cities Index reveals, the opportunities and risks are not static. Globalization affected how the world has developed in the past decade or two, and our Emerging Cities Outlook analysis indicates that these forces will continue to have an impact well into the future with implications for a range of international business development opportunities.
Indeed, members of a panel of corporate executives who helped in the development of the Index and the Outlook mentioned ways both could be used to inform their decision making, including (1) determining locations for regional headquarters and (2) finding and retaining the best talent by locating operations in the top global cities. One panel member noted how well the combination of the Index and the Outlook matched his company's global expansion plans. Clearly, successful cities will be those that stay on top of changes in the many dimensions that constitute global leadership.
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