Nearly 90 data centers are slated for construction in Ulanqab, a city of fewer than two million people in Inner Mongolia, as Beijing expands infrastructure for artificial intelligence. The projects include facilities bearing the names of Huawei, Kuaishou and VNET. A rural city now serves as a strategic platform for a national technology race.
“Before, we'd just sit there and wait for customers. Now we're constantly busy – picking up orders, doing this and that. We barely get a break,” said Ma Rong, 56, who has run a grocery store and guest house in the area for 30 years. He added, “Our business has gotten much better than before.”
Restaurant owner Liu Baoping, 58, said a highway demolition forced him to leave his original location. Since the data-center buildout began, his daily clientele has doubled. “The environment isn't as clean as before, but people's incomes and the economy – it's way better,” he said. The expansion brings business, but it also changes the environment and has brought down a highway.
Who Sets the Agenda
Beijing sees artificial intelligence as a potential engine of growth for an economy described as slowing and facing a shrinking population. Chinese leader Xi Jinping told a global artificial intelligence conference in Shanghai this past July that “China has embraced AI with open arms.” He called AI's use in manufacturing a “shining hallmark of Chinese modernization” and pointed to an initiative to bring it into sectors from health to home goods.
More than 700 million people in China already use AI, according to official statistics. Last month, Beijing announced a $560 billion plan to expand information infrastructure, including computing facilities, over the next five years. Leaders set the targets and spending; places such as Ulanqab are where the buildout takes shape.
As of last year, the United States had roughly 10 times more AI data centers than China, according to Stanford University research, and other estimates show it had vastly more computing power. American technology firms also have access to the most advanced chips, which the report describes as the single most important ingredient for developing AI. Chinese companies are investing too: listed Chinese firms are expected to double their investment this year to around $139 billion, according to research firm Rhodium Group. That's still less than one-fifth of the $800 billion in AI data-center investment by their U.S. peers.
China's chip shortage adds another limit to the race. U.S. export bans restrict Chinese companies' access to advanced AI chips, including certain models from Nvidia and AMD, while Beijing has restricted imports of some less powerful options. Domestic chipmakers are trying to catch up, but their technology still lags that of the United States, and supplies of cutting-edge models remain tight. “If you look at the overall production cost of building a data center, chips are the most important factor, and they just don't have enough,” said Nick Corvino, a researcher at the Carnegie Endowment for International Peace.
Power for the Buildout
Beijing is counting on abundant, affordable power, much of it renewable, to offset constraints on chips and capital. Between 2022 and 2025, China added electricity capacity equivalent to that of industrial power sources across the entire United States as of the end of 2025. In the first six months of 2026, China wasted enough excess green energy to power Mexico for a year, findings from the Centre for Research on Energy and Clean Air and Global Energy Monitor suggest.
Launched in 2022, the “Eastern data, Western compute” strategy directs data centers to western rural areas rich in sun, wind and land. There, facilities can absorb excess energy and support the green technology sector. China has designated eight national computing hubs and 10 national data-center clusters. Its latest five-year national economic blueprint calls for linking computing infrastructure with green energy.
Nearly half of Ulanqab's electricity grid draws from wind and solar. Under construction several miles from Bayin industrial park, the Envision “Galaxy Campus” spans more than 20 football fields. Once complete, it is slated to rank among the world's largest data centers by area. Envision says more than 80% of its power will come directly from company-operated wind farms, bypassing the grid.
Ricky Zheng, the facility's general manager, said battery systems will store wind power, while a solid-state transformer will adjust the power supplied to servers according to demand. The chilly climate reduces cooling needs, he said, and the facility uses a “zero-water” system with industrial alcohol as coolant. The first phase of the planned 2-gigawatt facility was fully booked, Zheng said. Workers are building additional phases for AI and cloud services.
This ambitious buildout still has limits. Some western computing hubs sit too far from users to serve certain tasks at the speeds required by urban centers in the densely populated east. Observers have also raised concerns about “ghost data centers,” rural projects built to meet a broad government initiative but lacking the hardware or users to justify the investment. Zheng said, “We designed this for the next 10 years. You need to get prepared for the future.”