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n the very first page of New York Times bestseller China Inc., author Ted C. Fishman lays out one statistic that explains why it's only the beginning in China:
   "China has between 100 and 160 cities with populations of 1 million or more," he writes.

NOT JUST INDIA ANYMORE: Illustrating the growing trend to place service operations in China, Unisys in March announced the expansion of its global sourcing services and technology center in Shanghai. Over the next three years, the company expects to expand global sourcing operations in China beyond Shanghai and employ approximately 1,000 people. The center will provide software development, information technology and business process outsourcing services, technical help desk services and technology support and maintenance services.

"America by contrast has nine, while Eastern and Western Europe combined have 36."
   That means a country where second and third tiers still offer first- rate returns. Just ask Intel, which is making chips in Chengdu, Sichuan, a city boasting 10 million residents but 30- percent lower wages than in Shanghai, where Intel already operates three plants. Dennis Meseroll, director of Tractus, an advisory firm, says Chengdu is one of the second- tier strong points for clusters on the vast China map. In addition to that city's electronics industry concentration, there is Dalian for contact centers and shared services centers, Wuhan for automotive and logistics, Chongqing and Wuhu for automotive, and Xian for aerospace – a sector which may be poised to be the next Chinese success story, even though it's historically been focused almost exclusively on military applications.
   China in early June approved the plan of Airbus to build a joint venture plant for assembly of its A320 aircraft in the Binhai New Area of Tianjin. The company expects to be ready to build four planes a month at the plant by 2010, employing as many as 600 people.
   "Tianjin Airport is the biggest cargo airport in China by volume," says Meseroll, and its TEDA economic zone is one of the highest ranked and best managed of the thousands of special economic zones across the nation, along with Suzhou's industrial park. Meseroll confesses to being somewhat puzzled initially by the location of some of the world's biggest corporations near the relatively small Tianjin airport, but then he and a colleague literally looked through the fence:
   "There were 16 huge Russian military cargo planes there," he says, "flying out consumer goods for the 'stans,'" meaning many of the CIS countries that came out of the former Soviet Union.
   Meseroll says other cities with some semblance of an aerospace cluster include Shenyang, in the northeast portion of the country, Chengdu and Xi'an. So it comes as no surprise that part of the Chinese government's US$17.4- billion airport improvement program by 2010 includes substantial regional hub investment in the cities of Chengdu, Kunming, Xi'an, Wuhan and Shenyang.
   As for the second- and third- tier cities in China, Meseroll says, "Great rivers start with a trickle somewhere."
   One motivator to give them a try is average wage inflation, which was 14 percent in China last year, but was between 25 percent and 30 percent in some areas, particularly around the traditional "magnet" cities close to the east coast. Inland, wages increased by only half or less that rate, and perhaps more importantly, turnover was in the 5- to 10- percent range, whereas it can be as high as 50 percent in some coastal areas.
   An additional advantage of these smaller but still substantial cities is unfortunately similar to what has driven some corporations to smaller cities in North America: a need to scatter facilities away from large cities at risk for terrorism. On June 9, the U.S. government issued a terrorism warning that specified increased risk in the cities of Beijing, Shanghai and Guangzhou.