by Matt Woolsey
 © iStockphoto |
| Shanghai, China |
Thirty years ago, Shenzhen, China, was little more than a fisherman's port. A decade ago it had blossomed into a small regional shipping center.
Today, it handles more container ships than Dubai, New York and Tokyo combined, according to data from the American Association of Port Authorities. It also boasts China's second-largest stock exchange.
Shenzhen's meteoric rise from obscurity to global prominence is related to China's rise. But it's also illustrative of how globalization turns secondary cities into commercial powers. Shenzhen ranks 10th on a new list of the world's most powerful emerging cities. It trails domestic neighbors Shanghai and Beijing, which rank first and second respectively.
These cities and others like them are blossoming as traditional powerhouses are suffering from the global economic slowdown. Whether it's due to the ease of operating an international business from Kuala Lumpur or the increased financial services activity in Mexico City, these cities are becoming increasingly important.
Behind the Numbers
Our rankings are from the MasterCard Worldwide Emerging Markets Index, which ranks 65 cities in 30 emerging markets on the basis of eight criteria: business environment; economic growth; economic environment, which assesses credit markets and investor protection; and the financial services environment, measuring the size of equity, bond, derivative and commodities trading
Then, the rankings examine how connected to the world the city is through commercial air and sea traffic; how educated and wired the city is; quality of life; and safety.
While growth and diversification are driving these cities' growth--notice that outsourcing capitals like Bangalore, Chennai, Manila and Xiamen did not crack the top 10--they are not immune to the global economic downturn.
"In the short term there's going to be a shrinking of worldwide aggregate demand," says Yuwa Hedrick-Wong, an economic adviser for MasterCard Worldwide. "In the U.S. especially we're already seeing an increased savings rate and we expect that to continue."
Protected Places
As the global financial crisis progresses, cities with the least exposure to the bad bets in the credit markets are in the best position to continue growing. Though Budapest scores well by most measures on our list, Hungary's recent need for a $6.5 billion bailout from the European Central Bank spells trouble for the capital city.
 © iStockphoto |
| Budapest, Hungary |
Less exposed, it seems so far, are cities in China, which dominate the list. The country posts four cities in the top 10 and 15 in the top 30. While the full extent of subprime and credit market woes have yet to be fully discovered, China hasn't taken a significant hit to its banking sector. It would have been a different story had Fannie Mae and Freddie Mac gone insolvent, two entities China was heavily invested in, but for now they've avoided the major bank problems of the West.
Still, the spots that performed well weren't just the world's budding megatropolises. Santiago, Chile, with its 250,000 people, landed at number five overall. Santiago ranked first of any emerging market for its economic and commercial environment, which includes government bond ratings, ease of dealing with licenses and costs of exporting and importing cargo. Even though the city is small, it's specialization in this category makes it a hub for businesses looking to forge operations in South America.
"Small cities can be a global platform for companies' global expansion," says Saskia Sassen, a professor on Columbia University's Committee on Global Thought.
Whether that's as a conduit to a region, like Budapest to the former Soviet nations, or because of unique services available, like Beijing's IT sector, cities are competing within sectors--not necessarily to become the next New York or London.
"I think we're seeing that there's no perfect global city," she says, "and that cities are developing specialized differences to compete."
A good example might be Singapore, which has leveraged its location between China and India to become one of the world's larger trade hubs, helping it graduate from the ranks of developing markets.
"Who would have thought, 10 years ago, that Singapore would be at the center of world distribution?" asks Wim Elfrink, chief globalization officer of Cisco Systems.
Today the city features the world's busiest port and, based on Elfrink's assessment, is rapidly becoming one of the world's centers for pharmaceutical research.
That development strategy, focused on commerce over finance, might help soften the ensuing economic blow for many of the emerging cities on our list.
"Many of these emerging economies have not been as financialized as those in established countries," says Sassen. "We used to think of that as a disadvantage, but it may turn out to be these cities' great advantage."
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