Boomtime on China’s grasslands

Rob Schmitz Nov 2, 2010

Boomtime on China’s grasslands

Rob Schmitz Nov 2, 2010


Bob Moon: We got word at the end of last week that the American economy is still lumbering along at an annual growth rate of only 2 percent. China’s GDP, on the other hand, is racing ahead at more than 9 percent a year. Coal is the fuel behind that growth, and most of it comes from the Chinese province of Inner Mongolia. It was once one of country’s poorest areas, but now, the Inner Mongolian city of Ordos has the highest economic growth per capita of any city in China.

Our China correspondent Rob Schmitz has the first of two reports on the “Boomtime on China’s Grasslands.”

ROB SCHMITZ: A decade ago, people here in Ordos got around by tractor, horseback or they simply walked. These days, they prefer Land Rovers, BMWs or, if Liu Yongxi has his way, Porsches.

Liu Yongxi speaks in Chinese

Liu shows off a retrofitted Porsche to a customer at his dealership. The car costs $350,000. He says he sells two of these a week — usually to mining executives and real estate developers who lug in suitcases full of cash to buy them.

WU JIN PIN: Many people here in Ordos, they became rich all of the sudden. But they do not know where to invest their money.

Businessman Wu Jin Pin wants to help lighten their wallets. The local government has given his company start-up funds to build an automobile industrial park devoted to selling luxury cars.

JIN PIN: You see, this is our big plan.

Wu shows off a 3-D model of the planned park. It’s peppered with dozens of miniature warehouses and skyscrapers overlooking tiny green forests. A river with bright blue plastic water meanders through lush green pasture — it’s a landscape reminiscent of the American Midwest. But there’s a problem: Ordos is located in a desert.

Wu admits the model exaggerates a little. For example, the bright blue river has actually gone dry.

SCHMITZ: There’s no more river?

JIN PIN: No river, never. On our plan, we are going to build an automobile park, like car racing.

SCHMITZ: So you’ll be able to race your cars down the dry riverbed, then.

JIN PIN: Right. This autopark will be number one in China.

Before it’s number one, though, a development on this scale is going to need some major investment, about $600 million.

SCHMITZ: And you’ve secured that investment?

JIN PIN: We can manage to do it.

Wu gives me a self-assured, almost cocky smile. It’s a smile you see on many faces here. A massive infusion of capital’s behind it. Ordos produces a sixth of China’s coal and a third of its natural gas. The region has become rich by supplying the fuel for China’s development boom. But it’s also fueled an obsession to build monumental projects that are difficult for visitors to comprehend, like this one.


Workers put the finishing touches on the new city of Ordos. You see, Ordos has so much money that city leaders want to move the population 15 miles away to a location with better access to water. The government spent a billion U.S. dollars to create an entirely new city, called Kangbashi. It’s got an enormous public square, museums, concert halls and row upon row of high-rise apartments, just waiting for people to move in. Problem is, nobody seems to have gotten the memo. Just 30,000 people live in a city built for 300,000.

Tang Lina is one of them. She admits living in a city the size of Pittsburgh that’s largely vacant is starting to become spooky.

TANG LINA: Life isn’t very convenient here. The nearest supermarket is half an hour away. My main concern is what’ll happen now. Will people start to move here? There are still a lot of empty properties.

The Ordos government ignored requests for an interview. They’ve told the Chinese press, though, to give it time. The region’s population is currently at 1.5 million, and growing quickly. In the meantime, the new city will have to stand empty and wait.

PATRICK CHOVANEC: The factors that have led to a ghost town in Ordos are factors that are actually present throughout China.

Tsinghua University business professor Patrick Chovanec says Ordos might be lonely, but it’s not alone. There are several other empty swaths of urban China. They’re the result of having a lot of money, but nowhere to park it. China has a closed capital account, which means people can’t invest outside the country. Playing the stock market’s too risky. They could put money in the bank, but they’d earn less than 2 percent interest. That’s less than the inflation rate.

CHOVANEC: People are flush with cash and they don’t really have that many outlets for it, so they have to put it somewhere. And in the Chinese economy right now the only place you can put it and feel somewhat confident that you’re retaining your value is in real estate, even if you’re buying 10 empty units in a city that nobody lives in.

Tian Xuefeng exudes this confidence. The 40-year-old spent the equivalent of $120,000 on this modern-looking three-bedroom apartment in a mostly empty city.

TIAN XUEFENG: Now I have two cars, a laptop and I live in such a big apartment. I’d never ever thought about all these when I was young. My dreams have come true.

Tian says the city may be vacant now, but just watch, he says. In five years, it’ll be full. Tian rolls his eyes when I bring up all the property here bought by speculators.

Tian speaking in Chinese

How can that be a problem, he asks. And then he points at me. People in your country, he says, slipping into an almost lecturing tone, they speculate too.

Reporting from Ordos, Inner Mongolia, I’m Rob Schmitz for Marketplace.

Moon: Tomorrow, Rob continues his look at the “Boomtime on China’s Grasslands.” You can also hear more on tomorrow’s Marketplace Morning Report — and check out Rob’s photos of Inner Mongolia.

We’re here to help you navigate this changed world and economy.

Our mission at Marketplace is to raise the economic intelligence of the country. It’s a tough task, but it’s never been more important.

In the past year, we’ve seen record unemployment, stimulus bills, and reddit users influencing the stock market. Marketplace helps you understand it all, will fact-based, approachable, and unbiased reporting.

Generous support from listeners and readers is what powers our nonprofit news—and your donation today will help provide this essential service. For just $5/month, you can sustain independent journalism that keeps you and thousands of others informed.