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The Chinese central government introduced a ranking system in the 1980s to facilitate the staged rollout of infrastructure and urban development throughout the country. Cities were ranked by tier according to the government’s development priorities. The Chinese tiered city system is characterized by the city’s population scale with Shanghai topping permanent population at 23.8 million, followed by Beijing at 20.7 million, Guangzhou at 15 million and Shenzhen at 13 million in 2012. (starmass.com).
China now has 613 cities which are divided by four tiers to analyze consumer behavior, economy, politics and local trends, the 3 main categories are GDP, Politics and Population (South China Post).
The assignment of the tier number to each city depends on the quantity of gdp, population and whether the city is directly controlled by the government (politics). Tier one refers to cities with highest gdp and population rate as well as direct government control, in this case a good example would be the capital Beijing. Since the cities get a rank for each category, a city can have a rank of 1-2-1 and still be the first tier.
For those who do business, the tier system is important to understand before deciding how to enter the Chinese market, because there is different consumer behavior in each tier. Even though the government and the industry are using the tier classification, there is no official definition. (sinostep.com)