China’s Cross-City Consumption: Regional Preference and Mutual Benefits

Abstract

In China, intercity consumption exhibits segmented market characteristics shaped by geographical proximity and psychological affinity within the same province. This study constructs an intercity consumption network encompassing 295 prefecture-level cities using 14.4 billion intercity consumption records from UnionPay Business. First, we apply social network analysis to examine the network’s evolution over the sample period. Building on this framework, the Temporal Exponential Random Graph Model (TERGM) is employed to investigate the determinants and formation mechanisms of intercity consumption relationships. The findings reveal that the overall connectivity of China’s consumption network has increased over the sample period, with a consumption structure centered on provincial capitals and municipalities directly under the central government. According to the TERGM results, cities with higher levels of economic development, larger populations, and greater income disparities are more likely to attract intercity consumption flows. Additionally, significant “provincial clustering effects,” “provincial capital effects,” and “geographical effects” are observed. Specifically, cities within the same province are more inclined to establish intercity consumption ties, while provincial capitals and centrally administered municipalities demonstrate a greater capacity to attract consumption. Moreover, geographical proximity, particularly between neighboring cities, fosters stronger intercity consumption linkages. Furthermore, evidence suggests the presence of reciprocity within the intercity consumption network, indicating a mutual reinforcement effect that enhances the overall connectivity of cities. The insights drawn from this study provide valuable reference for understanding and leveraging the advantages of China’s large-scale market.