June 19, 2008 -- Wuhan, a transportation hub linking the western and northern regions of China, has become a hot spot for foreign investors. Starbucks, IKEA China, and Cartier are several of the global brands lining up to invest in the city.

"Wuhan might be a good option for foreign investors looking to do business in China. Other western cities like Chengdu and Chongqing are attracting foreign investors as well," Hui Wang, an analyst at Shanghai-based research firm Haitong Securities Co. Ltd., told Emerging China.

"It's a marketing strategy used by certain enterprises, which doesn't affect the local Wuhan market as much as we might expect," he said. Once foreign firms have set up their distribution networks in Wuhan, he said, they will likely conduct most of their business in more western regions of China.

Haitong Securities' Wang said the real estate industry is an area where more investments would be coming in from abroad, which may not necessarily be the case for the chain store market. "For the chain store market, I prefer to call it as the occasional phenomena," he said.

One such occasional phenomenon would be the entry of Swedish furniture manufacturer IKEA, which is keen on setting up shop in Wuhan.

"We are willing to set up a new IKEA store in Wuhan indeed," Lide Xu, media department manager of IKEA China, told Emerging China, but she declined to reveal a specific schedule for IKEA's entry to the city.

Starbuck's, another ubiquitous global brand, has opened an outlet at the New World Plaza in Wuhan. "At first glance from the outside, you wouldn't know you were in Wuhan," Lee Frank, a Wuhan-based English teacher, says on his blog, Wuhan, got you all in check. "The inside looks the same as any other Starbucks." There's even a local souvenir, he says, a giant mug that says "Wuhan" with a picture of Wuhan's Yellow Crane Tower.

"China has huge potential as a luxury market, given its massive urban population and the younger generation's affinity for designer goods," said Nick Debnam, head of consumer markets, Asia Pacific KPMG in a May report. "Most of the world's leading luxury brands are rapidly expanding their China operations and that push is now extending to smaller Chinese cities."

For example, global luxury brand Cartier is also eyeing a move into Wuhan.

"Cartier has been expanding its market scale in China in recent years," Kai Zhang, Cartier's deputy general manager for Northern China, told local media.

He said the company plans to pay more attention to second and third tier cities even as it maintains its presence in first-tier cities like Beijing, which have already become saturated markets.

That strategy is supported by the KPMG research -- people in second-tier cities in China have attitudes that are as positive towards luxury brands as those in Shanghai, Beijing, and Guangzhou. In fact, respondents were more likely to say that ownership of luxury brand goods was a sign of success.