China's AI Boom Centers on Inner Mongolia's Ulanqab
Original: The Unlikely Place at the Center of China’s AI Boom
Why This Matters
Ulanqab's rapid buildout signals Chinese AI firms closing a major infrastructure gap with US rivals.
Inner Mongolia's Ulanqab city has emerged as China's fastest-growing AI data center hub, with nearly 100 data centers opened or under construction since 2016. Chinese companies have pledged 12.5 gigawatts of combined capacity, with over 70% of commitments announced in the past year alone, according to Goldman Sachs.
Located two hours west of Beijing by train, Ulanqab — a city of approximately 1.5 million in Inner Mongolia — has become China's premier destination for AI data center construction. Goldman Sachs research identifies it as one of Asia's fastest-growing compute clusters, with pledged capacity of 12.5 gigawatts surpassing the projected 10 gigawatts of OpenAI's $500 billion Stargate Project.
Key drivers include cheap electricity (fueled by wind, solar, and coal), high-altitude cooling advantages from long cold winters, and low-latency connectivity to Beijing. Notably, DeepSeek, ByteDance, Alibaba, and Xiaohongshu are all reportedly building their own data center infrastructure in the city — a strategic shift from the previous norm of renting compute from cloud providers.
The boom signals Chinese AI companies closing the infrastructure gap with American counterparts. However, water scarcity presents a serious challenge: Ulanqab receives only about 14 inches of rain annually, and the local water company was already forced to shut down waterworks for seven hours nightly last month to manage peak demand — before most planned data centers are even operational. Seasonal data indicates additional cooling water is only required during two months of the year, but the cumulative environmental impact remains a significant concern.
Inner Mongolia's data center history dates to 2016 when Huawei opened its first facility in Ulanqab. Apple followed in 2019, and in 2021 the region was designated a hub under China's national 'Eastern Data, Western Compute' initiative.