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CX Tech is Caixin Global's real-time tech news portal, featuring 24-hour news, short-form analysis, and roundups from business and tech media in China. Doubles Down on Smaller-Cities Expansion to Bolster 2020 Growth

By Ding Yi / Jan 15, 2020 01:28 PM / Business & Tech

Photo: VCG

Photo: VCG has reiterated its strategy to expand into China’s smaller cities, which have become emerging drivers of growth for the country’s online retailers.

Speaking at an annual company conference Sunday, Xu Lei, the CEO of JD’s retail arm, said in the next three years the company will ramp up its expansion into so-called lower-tier cities where consumption potential is not yet fully realized.

JD’s plan is based on forecasts that the emergence by 2020 of what Chinese politicians call a “moderately prosperous society” will lead to sweeping consumption upgrades in less-developed cities. China is on track to double its gross national product and per capita income in 2020 compared with 2010 levels.

As competition in China’s big cities intensifies, lower-tier cities represent a new opportunity for e-commerce giants. In February, founder Richard Liu outlined plans to penetrate deeper into the country’s less-developed areas.

And in September, upgraded its group-buying service, a move some observers said could help the Beijing-based online retailer go toe-to-toe with rival Pinduoduo, which has long been popular in smaller cities and rural areas.

Consumption in China’s lower-tier cities is expected to surge from $2.3 trillion in 2017 to $6.9 trillion in 2030 thanks to favorable government policies, a population boom, higher household income, and a stronger appetite to spend, according to consulting firm Morgan Stanley.

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