A Phoenix Arises On the New Silk Road

Lanzhou’s importance was re-defined by the implementation of the fifth New Area of China within the greater concept of the New Silk Road. Lanzhou’s claim to fame dates back ages when it was the first major Chinese city that you entered when arriving as a merchant from West and Central Asia. It was dubbed the „Golden City“ where you could cross the Yellow River and continue the journey to the cosmopolitan capital Chang’an (at Xi’an). Much later, under Mao Zedong, when inland heavy industry was perceived to be the embodiment of communal wealth, the city seemed well-prepared for the future. However, its advantages soon ended (quite ironically) when China again opened up to the world, and the coastal areas turned into the big winners. Many locals hoped that Lanzhou would rise again when Hu Jintao and Wen Jiabao came to power, but Lanzhou kept lagging behind and Gansu province economically even lost ground to the other provinces of the region. But finally, at the end of their term, the leading men in Zhongnanhai made Lanzhou the focal point of the Go West initiative: The fifth New Area of China (the first in the northwest), was created, granting much symbolic weight to Lanzhou and moving it to the forefront of China’s development agenda.

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Lanzhou on the map

The city is acting as the main transportation hub and the center of northwest China, the least-developed region of the country, now experiencing an immense infrastructural upgrade. The city has long lagged behind in terms of development, especially when compared to Xi’an, the economically predominant metropolis with a significantly higher population. Many regarded Xi’an to be the logical gateway to the northwest forever. But this perspective is in fact shortsighted because Xi’an is situated only on the fringe of the region. A sustainable economic boom actually needs Lanzhou as a  forerunner, and not as a fellow-runner in terms of growth. This is because Lanzhou is a crucial reference point to the neighboring provincial-level units Qinghai, Ningxia, and Xinjiang. Lying between the two most populous cities of the region, Xi’an and Ürümqi, and quite close to the provincial capitals Xining and Yinchuan, Lanzhou is truly situated at the core. Several expressways and railway lines are heading into all possible directions, making Lanzhou a major transportation and logistics hub. International attention was drawn to the area by the construction of the Lhasa train from Golmud to Tibet to which Lanzhou is a comfortable stopover. In the near future, there will also be several high-speed connections from here: to Xi’an, Beijing, Shanghai, Chengdu, Chongqing, and via Xining to Xinjiang (the highest-situated high speed rail track on earth). A metro line network is under construction, encompassing three urban lines and three lines that will connect to the outlying districts. The city’s airport is not yet among the top 30 airports of the country, but a new terminal was opened in 2015. It is destined to grow in importance due to the construction of the Lanzhou New Area directly adjacent to the airport. Currently, there are only few flights to other Asian countries (Taipeh, Hong Kong, Bangkok), and one to St. Petersburg.

Better train connections have advanced tourism in Lanzhou by making it an attractive stopover to other destinations along the ancient Silk Road. The number of traveling Chinese (recently especially from Sichuan) has increased strongly over the past few years. They are attracted to no small extent by the Muslim Hui restaurants which offer the famous hand-pulled Lanzhou Lamian noodles (in Lanzhou simply called beef noodles, „Niu Rou Mian“). The capital of Gansu province is the only major city with its center directly seated on the Yellow River. It is embedded in a picturesque way between steep loess hills and traversed by the upper reaches of the silt-laden stream. With an altitude of 1.600 m above sea level, it is one of China’s most high-lying metropolises. The four urban districts, with a total of 2.2 million citizens, are stretching alongside the river bank and are separated from each other by water or mountains. It is expected that the population will increase dramatically over the coming years. Chengguan district is the vibrant, already well-developed city center; Qilihe is a dynamic but less developed district; and Anning and Xigu are currently experiencing remarkable infrastructural build-up of residential areas. There is quite a lot of talking in the internet about the bad air quality in Lanzhou, but the air in Beijing or other big cities in the north is not (much) better, and there has been quite some effort to decrease industrial emissions in Lanzhou.

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The pictureque skyline of Lanzhou, plus the Yellow River and the mountains

Lanzhou’s heavy industry has a notably strong standing, while its overall economy is starting to diversify. The city proper owns an ETDZ and an HTDZ, with petrochemical, chemical, and non-ferrous metallurgic facilities. There is also manufacturing of equipment for the oil, mining, nuclear power, hydroelectricity, and railway industry. Textiles, garments, rubber, paper, and bio-pharmaceuticals are being produced, and agricultural products are being processed. Minerals are abundant around the city and will be mined more extensively in the future. The service sector is not as developed as in other cities but will probably become more important when income levels rise. As land has become scarce in Lanzhou, a convincing real estate and infrastructure boom has gained ground.

When evaluating Lanzhou’s economic outlook, we actually need to distinguish „two Lanzhous“. One is the main city, the other one is the „new district“ (Lanzhou Xinqu) that is currently under construction and expected to greatly influence Lanzhou’s economic well-being in the future. Some may have expected the city to forever stay a languorous backwater with little self-induced power. But ultimately a great plan like the Go West initiative can’t be dismissed. Although the annual growth rate was 12 percent within the period from 2000 to 2012, this was not high enough to enable Lanzhou to become the real driving engine it was supposed to be. New ideas had to be implemented in order to transform China’s northwest into a hotspot for investments. 

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A futuristic view on one of Lanzhou’s impressive development projects

The concept of the Lanzhou New Area (LNA) shows the Central Government’s commitment to initiate high growth and to achieve sustainable advancement no matter the costs. The year 2012 was the turning point when the foundation of the local economy was radically altered. It was an innovative step to import the concept of the New Areas – which require a huge expanse of plain land – to a region where steep loess hills are the predominant feature of geography. Allegedly 700 mountains around the airport were proverbially moved at biblical dimensions. The fact that the new district is a 30-minute car drive away from the main city, separated from it by a barren wasteland, means that it will hardly ever become part of the core urban area of Lanzhou. Instead, as one million people are to be settled here, the New Area will be a second, complementary city to Lanzhou proper. There will be diverse manufacturing as well as a comprehensive service industry grouping around the Central Business District (CBD). The New Area will become connected to Lanzhou’s West train station in the Qilihe district (not too far from the city center), where all high-speed trains depart. To make the New Area especially attractive, a free trade zone was founded, and, as Lanzhou plays a key role in the Go West initiative, the proposals even extend beyond borders: From here, trains will head to Germany via Kazakhstan, interconnecting the Eurasian continent more intensively than ever. Provided that the concept develops to its full extent, Lanzhou is going to stand its rank as the true center of northwest China.

Wherever an important movement starts, it needs pioneers. Without pioneers, nothing great can be achieved. This has been so in science, in politics, in business. And when we focus on the Chinese Go West initiative, we can see that pioneers were crucial for the success stories of Chongqing and Chengdu – not to mention the guys who had invested early on in Guangdong and Shanghai. Their efforts and courage have been rewarded in many ways.  As previously stated, Lanzhou had been a backwater for a long time. It needed extraordinary help from the central government to jump-start its development on a faster track. It now seems to be way too early to tell if the city’s ambitious plans will really work out. But, the key message of Lanzhou is: Pioneers, invest now! 

Lanzhou offers an attractive combination of advantageous incentives while there is an enormous political drive to create another big success story. This city is at a development level other provincial capitals have already surpassed, and at the same time it is the center of one of China’s big political and geographical regions. Inland transportation has improved and will improve further. The low labor and generally low production costs are very favorable. As Lanzhou is a regional education center, there should be no lack of high-level talent and educated workers for businesses that invest early on. Much improvement in infrastructure has already been realized, signifying the importance that the Central Government as well as the city government are placing on especially the New Area of Lanzhou. This development does not just reflect Lanzhou’s commitment, but above all it shows the Chinese government’s intention. There will be a lot of diverse support by politics to make economic engagement a success story. The more international companies will assess their advantages in Lanzhou, the more will decide to come here. And more will follow, creating positive network effects. To be a pioneer is clearly risky, but the return may be well worth the risk.

The commitment of the Chinese government to this place is particularly strong, and this will clearly help early movers who aim to expand their business in the region. Ever since the State Council has decided to provide Lanzhou with the means to create a vast New Area next to its airport, having a free-trade zone integrated that will be connected via train with Europe, Lanzhou has become a staging post for pioneer investors. The New Area is estimated to finally attract one million people who will settle next to the airport, in order to serve businesses’ needs for cheap labor. There will be competition between the new district and the city proper, while both of them combined are at the center of the northwestern region. Upgraded infrastructure will connect Lanzhou more closely with other cities and bolster intra- and interregional competition. Some investors may have to overcome a mental threshold before considering Lanzhou as a key investment choice, but expectations are that costs here are significantly lower, support stronger and rewards higher than in other places. This should be borne in mind when taking a closer look at the region. Investing in Lanzhou is not a decision just for now, but it is a decision that also looks ahead – into the near, encouraging future.

© China Under Construction, 2016