The Unlikely Place at the Center of China’s AI Boom
Cheap energy, abundant land, and proximity to Beijing have turned a city in Inner Mongolia into a crucial hub for data centers.
In Ulanqab, a city in Inner Mongolia with a population of around 1.5 million, nearly 100 data centers have been established or are in the process of construction since 2016. Chinese firms have pledged to develop projects with a combined estimated capacity of 12.5 gigawatts in the city, with over 70 percent of the commitments announced in the past year, making it one of the fastest-growing compute clusters in Asia, according to a research note by Goldman Sachs.
The city's high elevation on the Inner Mongolian Plateau and long, cold winters allow data centers there to consume less energy for cooling. Its proximity to Beijing also minimizes data transmission latency. However, the most attractive factor is the lower electricity costs compared to other parts of China, driven by the growth of wind and solar energy and an abundant supply of coal.
Chinese AI companies are now investing in their own infrastructure, with DeepSeek, ByteDance, Alibaba, and Xiaohongshu reportedly building AI data centers in Ulanqab. The boom highlights their catch-up efforts to American AI peers. Yet, the region faces a challenge in providing enough water, as Ulanqab is as dry as Denver with only 14 inches of rain annually.
The local government has had to reduce water supply to prevent peak demand, even during winter when the data centers need additional cooling water. The "Eastern Data, Western Compute" government project aims to build data centers in China's Western hinterlands, with Inner Mongolia being a key hub. Despite initial latency issues, AI training, which requires less real-time data exchange, has made these remote data centers viable.
Inner Mongolia's growth in data centers is driven more by commercial demand than government-led investment. China's government is also interested in building data centers in Inner Mongolia to absorb excess renewable energy capacity, creating a win-win strategy for both data center construction and renewable energy transition. However, coal still accounts for 37 percent of Ulanqab's electricity, and the pace and extent of the region's coal-to-renewable energy transition remain uncertain.
Written by urgent.news from Wired's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
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