Saturday, April 24, 2010

Chinese cities you've never heard of, but should know - Part 3

Ordos, a city in Inner Mongolia, is arguably growing faster than any other city in the People's Republic of China. In the middle of the Ordos Desert, the city already boasts the second highest per capita income in China (after Shanghai).

Image from Wikipedia

Ordos' wealth largely comes from its natural resources. The Ordos region has 1/6th of all the coal reserves in China. It also is where most of the cashmere in China comes from. Here is an article from the Ordos government's website on the city's natural bounty:
Ordos is abundant with resources, among which the most well-known are Sheep, Coal, Kaolin and Natural Gas. Aerbasi cashmere, known as “fiber diamond” and “soft gold”, is noted for its long and thin fiber. The annual output of Aerbasi cashmere in Ordos is more than 700,000 kgs, and the annual production capacity of cashmere sweaters exceeds 8,900,000 pieces, which are exported to places all over the world.

Ordos has 149.6 billion tons of proven coal reserves, accounting for about one-sixth of the total amount nationwide and half of the entire quantity in Inner Mongolia. Ordos coal enjoys the advantages of low ash, low sulfur, low phosphorus and high heat output, thus was recognized as “clean coal” by Chinese and foreign experts. Till now the coal mines developed include mainly Zhungeer, Dongsheng, Wanlichuan and Xizhuozishan. In 2007 a total 198.5 million tons of coal was produced.

Read the Whole Article
While rich in natural resources, the Chinese government is also investing a lot of human capital into the the region as well.

Ordos is set to build the largest solar power plant in the world. Here is a small blurb about the proposed solar plant from last September in gizmag:
In the midst of overwhelming debate over climate change - an issue that seemingly paralyzes politicians - the Chinese government has announced its intention to construct a 2-gigawatt solar power plant in Ordos City, Inner Mongolia. Mike Ahearn, CEO of the Arizona-based company which will construct the plant, describes the unprecedented project as “an encouraging first step forward toward the mass-scale deployment of solar power worldwide to help mitigate climate change concerns.”


The magnitude of the development is many times greater than any solar plant in operation or even contemplated, including projects such as the 290-megawatt Starwood Solar I and the 500-megawatt solar thermal project in the Mojave Desert.

If successful, the Ordos plant will cover a staggering 25-square miles, cost billions of dollars and power 3 million Chinese homes.

Read the Whole Article
In addition to the solar plant, the Chinese government has invested massively in a new section of Ordos called Kangbashi. Local officials are hoping that their development of Kangbashi's infrastructure will one day allow its residents to have the same luxurious lifestyle that the wealthy in Shanghai, Beijing, and other more developed cities currently enjoy.

The build up of Kangbashi is controversial. It's questionable because, well, nobody lives in this district that is being fiercely developed:

First, an article on the building of Kangbashi from Foreign Policy:

In the gritty Inner Mongolian wind, I stood at the pinnacle of the global economy, at least in terms of GDP growth: the main drag of one of the fastest growing cities in the fastest-growing region in all of China, the world's supposed new economic powerhouse.

Built in a breakneck five years, Kangbashi is a state-of-the-art city full of architectural marvels and sculpture gardens. There's just one thing missing: people. The city, built by the government and funded with coal money, its chief industries energy and carmaking, has been mostly vacant for as long as it has been complete, except for the massive municipal headquarters. It's a grand canyon of empty monoliths. In a paradox only possible in today's economic system, Kangbashi manages to be both a boom town and a ghost town at the same time.

Kangbashi represents a particularly destructive economic force at work in China today: an obsession with GDP that ignores all other metrics of progress or human capital. GDP as calculated in China -- or the rest of the world, for that matter -- doesn't make any distinction between quantity and quality, or between creative and destructive expenditures.


Still, China's emphasis on growth at all costs is creating some bizarre monsters, and Kangbashi is one of them. Six years ago, Ordos county officials decided to move their headquarters out of old, cramped Dongsheng and into land that was then occupied by two small villages inhabited by about 1,400 people. By the end of 2008, the new district of Kangbashi was crisscrossed with 2.4 billion yuan ($352 million) worth of roads. Officials initially said they expected the population to reach 100,000 this year and 300,000 by 2020. They also say the population reached 50,000 last year, which seems improbable given that pedestrians on the street were outnumbered by street sweepers. A local real estate agent, Cao Ting, told me it had actually been easy to sell apartments. She said 80 percent of the apartments had been sold. I believed her even though 80 percent of them looked empty, with no curtains or furniture visible during the day and no lights on at night. The buyers were mostly investors or future residents waiting for schools and hospitals to open before moving in.

Read the Whole Article
Second, a video from Al Jazeera on the ghost town:

And third, a photo-essay on Kangbashi from Time Magazine (click the link for all fourteen of the images):

On the second page of the Foreign Policy article from above about Kangbashi, it says the following:
The new buildings look great from the outside, and they're economically fine on paper, if you believe the local government. And they may continue in this state, since the government will prop up the property market because it holds up so much else as well. Local governments' revenues are completely dependent on land sales. Eventually, perhaps, the population will catch up with this accelerated development.
I'm not sure what that long-term implications of the break-neck development Kangbashi and Ordos are. I find such wild development troubling. The construction is being propagated by a system - both government and private - that is almost utterly dependent upon making money through eating up and developing real estate. Such an economic system is predicated on higher and higher real estate prices going forward. Being an American who's witnessed the folly of such practices, I'm weary of this kind of stuff.

Saying that, I wouldn't bet against those apartments filling up with people in the coming years. Of course, China's economy needs to continue to boom and its people need to get richer and richer for that to happen. But at this point, it looks like China's economy is immune to the economic bug that the rest of the world has come down with.

China's economy, largely directed from central planning as opposed to private enterprise, continues to develop. And Ordos is at the front of the pack of the large number of cities pushing forward.


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Hopfrog said...

I am so fascinated to see what happens with the experiment that is Ordos. I think it would be an incredible precedent if this proved to be an easy way for the working class to transition to better living conditions. Sadly, I feel this will only happen after reality sets in that housing is not a viable commodity.

Much as we saw in the states, housing is being seen as an investment vehicle more than.... well, housing! Eventually the bubble is going to pop and people will eat their losses and these homes will one day become affordable to the masses. For now, they will sit empty.

I am really jazzed about going over again, and its fun to think about what city to head to. Chongqing, Ordos, Xian, Qingdao, Beijing, and many others really appeal to me for the varied experiences they would provide.

Ramesh said...

Great post Mark - I know very little about Ordus more than just having heard of it. Have you traveled in those parts ??

As you rightly say, China is not immune from the laws of economics irrespective of what the officials might have to say. Such senseless development are most unlikely to work. Some of China's investments in infrastructure is a consequence of going berserk in times of plenty. A great parallel is the UK pouring money into the NHS in the good times - it did some good, but a lot of it was waste. White elephants anywhere in the world will show up however much anybody can try to hide it.

Mark said...

From what I understand, there just aren't good places for Chinese people to put their money. So people with money have to end up speculating on the stock market and real estate.

America is certainly hurting from its infatuation of viewing houses as investments. The housing crash (and everything associated with it) is what threw us into a tailspin. And I feel like the current lack of a rebound in real estate is keeping us from really recovering. It's sad that we're in this position.

Hopfrog, you surely know the pains associated with this stuff more than most living in Vegas. I'm sure you've seen plenty of crazy stuff going on with condos and houses out there.

On a better note, you're right, there certainly is a lot to do in China. It's impossible to see everything worth seeing in the country. There's so much of the China I haven't seen.

Saying that, I've seen more of China than I have America and am grateful that I've been able to see as much as I have.

Mark said...

@Ramesh - I haven't been to Ordos or anywhere else in Inner Mongolia. It'd definitely be an interesting place to go though!

I like the words you used - "senseless development." That's a good way of putting it. Yes, buildings are going up and people are working. But to what end?

It's very troubling to see (although it does make for some great photography).

Hopfrog said...

Yeah its pretty spooky, a lot of those Ordos neighborhoods look like the Vegas "master planned communities".... right down to the cheap roofing tiles and the funky little "O" shaped decoration that gets slapped on the walls at the top. I have no idea what decorative function it serves, but I see them on buildings all the time in Vegas and now Ordos.

Oh, and those master planned communities here, well they still look like ghost towns.