Urban Transformation

Cities drive global prosperity – but the way they do that is changing

Guangzhou, a recent entry into the top 20 largest world cities – alongside several other Asian contenders.

Guangzhou, a recent entry into the top 20 largest world cities – alongside several other Asian contenders. Image: Unsplash/Loeng Lig

Matthew Cooper
Vice-President of Data, World Data Lab
Marco Fengler
Data Analyst, World Data Lab
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This article is part of: Centre for Urban Transformation
  • With urbanization and global prosperity interlinked, defining and analyzing the cities of the future has never been more pressing.
  • The UN's definition of an 'economic city' is a good basis for research.
  • The economic power of megacities is in slow decline, with smaller cities picking up the slack.

Cities have always been at the heart of exchange.

Before the steam engine, these exchanges took place in key locations on waterways. For example, if you were a medieval trader exchanging goods between mainland Europe and the Mediterranean, you'd sail your ship as close to the heart of Europe as possible, at the northernmost point of the Mediterranean – precisely where the city of Venice happened to be located, making it one of the wealthiest municipalities of that time.

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Venice is a prime example of key economic forces that are even more true today: Density creates economies of scale and nurtures innovation through specialization. This led to what Harvard professor Edward Glaeser calls the “triumph of the city”, making them the most prosperous place to live in.

Since 2008, more than half the world's population has lived in cities. Today, we are at 58% or 4.7 billion urban dwellers, representing 83% (or $51 trillion) of total household spending. By 2028, 5 billion people will live in cities. With urbanization evidently leading to prosperity, it begs the question: What do today's cities look like, and how will they look tomorrow?

Comparison of World Data Lab’s economic city and admin-defined city boundaries
Comparison of World Data Lab’s economic city and admin-defined city boundaries Image: World Data Lab

1. What is a city?

Cities need to be comparable. Every country has a different definition of what constitutes a city. Some countries define them using a minimum population size: In India, a city is 5,000 people, while in China, it’s 100,000. In some urban areas, several mayors preside over different connected agglomerations (think of the German Ruhrgebiet that includes Dortmund, Essen and Duisburg). In others, such as Washington DC or Buenos Aires, the official city is much smaller than the contiguous area where people live, work and consume.

Because administrative arrangements are so varied across the world, we prefer to focus on what we call an “economic city”, defined based on the degree of urbanization from the UN Statistical Commission. This consists of (i) a contiguous surface of built-up land cover with buildings and roads, unseparated by forests, agriculture, water bodies or bare ground; (ii) within a single country; (iii) with a total surface area greater than 10 km2; (iv) with a density of at least 500 people per km2; (v) and a population of at least 50,000.

This method identifies large groups of economically integrated people living close together; in other words, cities. By this definition, of 4.7 billion urban dwellers worldwide, 3 billion live within the economic boundaries of a city. There are over 6,000 economic cities in the world.

2. Which is the largest city in the world?

Tokyo is not the largest city in the world. Using the economic city definition, Tokyo, which in most rankings tops the list for the largest city in the world, no longer holds the crown. Guangzhou is the largest city in the world, with 45 million people. In terms of spending power, Tokyo topped the charts until last decade, when New York took the lead. In 2025, New York will be the first city in history to spend $1 trillion annually, the same amount as Canada.

China’s largest cities are making the jump into the top 20 with Guangzhou, Beijing and Shanghai emerging in the list this decade. Joining the three Chinese cities, Jakarta rounds out the four newcomers in the top 20 highest-spending cities in the world by 2040.

3. The world’s economic engines

Of the 4.7 billion people living in cities, 3.1 billion are consumers, meaning they are part of the global middle class and spend more than $12 daily.

Cities have always been better off than rural areas; however, more consumers are now in more cities than ever. In 2000, there were 1,121 cities exceeding 300,000 people. Today there are 1,529. These changes have been driven by the rise of Asian cities, primarily China and India. India went from 12 cities with 300,000 consumers to 104 in a quarter-century. Keeping with the example of India, just because these cities are in the same country doesn’t mean their growth and composition are homogenous. In Mumbai, people are roughly six years older than in New Delhi, and people in New Delhi spend 15% more. To understand consumer behaviours, you need a city view, not a country view.

The top 20 cities worldwide by spending power.
The top 20 cities worldwide by spending power. Image: World Data Lab

4. Cities of the future

Though large cities will continue to grow, their dominance as a share of total spending is shrinking. In 2000, the five cities with the highest spending power (Tokyo, New York, Osaka, Los Angeles and London) made up 10% of the world’s spending. In 2040, that percentage will be only 5%, meaning spending is less concentrated in the megacities. Large cities are still growing, so why is their relative spending power diminishing? The reason is that many more small cities are emerging, growing more rapidly, and taking the spending share from the large ones. If we take the top 100 cities in 2024, their spending power is $15 trillion. All other cities combined also account for $15 trillion. By 2040, the top 100 cities will double their spending power, and the rest of the cities will more than triple. To invest in growth, look beyond the 100 cities. Look towards the top 1,000.

The urban action is in small cities.
The urban action is in small cities. Image: World Data Lab, 6000 Cities Database and projections

1,008 cities have more than 300,000 consumers. Where are they? Almost half (488) are in Asia, while Europe, the most urban continent, has the second most with 179 cities. Two decades ago, Europe had the most cities with over 300,000 consumers. In Asia, rapid urbanization coupled with more educated and wealthier younger generations, especially millennials, has created a surge of consumer cities. And this is only the beginning. Another 440 cities in Asia will reach this threshold by 2040, a third of which are in China, and more than a third are in India.

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How is the World Economic Forum supporting the development of cities and communities globally?

Cities are economic powerhouses. Though many form in similar ways, often as an intersection of exchange, they all have their unique qualities. With growing urbanization comes many challenges, such as urban planning, but these challenges come with the reward of living in a more prosperous world.

The more we know about the future of cities, the better prepared we can be to share this prosperity.

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