There is a definite will to let phoenix arise from the ashes – so turn your eyes to Lanzhou! All the Central Government’s eager incentives to revive the economic core of China’s northwestern region during the past few decades had not effectively helped this city in its efforts to catch up. Currently, the wind has changed dramatically, and the Chinese economic miracle, retreating from other parts of the country, is about to hit Lanzhou at full force. Here is where former president Hu Jintao and his prime minister Wen Jiabao served many influential years of their early careers, making them aware of their people’s needs and problems. And when current president Xi Jinping talks about reviving the ancient Silk Road, in order to connect China with the outside world more closely than ever, then his words will have to be realized in Lanzhou.

Lanzhou’s claim to fame dates back to the ages of the ancient Silk Road when it was the first major Chinese city that you entered when arriving as a merchant from West and Central Asia. Lanzhou 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 country’s northwest), was created, granting much symbolic weight to Lanzhou and moving it to the forefront of China’s development agenda.

The capital of Gansu province is embedded between steep loess hills and traversed by the upper Yellow River. It is the only major city with its center directly situated on the country’s second largest, silt-laden stream. Furthermore, with an altitude of 1.600 m above sea level, it is one of the highest-situated capital cities in the country. 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.

Lanzhou proper owns an ETDZ and an HTDZ, where heavy industry has a very strong standing 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.

The local real estate boom is especially obvious in the Jiuzhou Development Zone in the loess hills north of the river. Only 15 minutes car drive away from the city center, bulldozers are working non-stop to gradually flatten the mountains and as a result are reclaiming huge masses of land which then can be sold to real estate developers. Living space has to be created for many tens of thousands of migrants who are fluxing into the city. There will even be a tunnel, running below a mountain range to connect Jiuzhou directly with the city proper on the other side of the river. Improved traffic connections to other Chinese regions have advanced tourism in Lanzhou over the past few years, and the number of traveling Chinese (especially from Sichuan and Beijing) has increased strongly. They often make a stopover on the way to the famous sights along the Silk Road and 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“).

Lanzhou is situated advantageously in the actual center of northwest China, lying between the two most populous cities of the region, Xi’an and Ürümqi, and quite close to the provincial capitals of Qinghai and Ningxia. 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).

The city has lagged far behind in terms of infrastructural development, especially when compared to Xi’an, the economically predominant city with a significantly higher population. But this is starting to change. 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 cities (Taipeh, Hong Kong, Bangkok), and one to St. Petersburg.

On paper, Xi’an seems to be the gateway to northwest China, but it is situated only on the fringe of the region, not at the core. A sustainable economic boom of the whole region will actually need Lanzhou as a forerunner, and not as a fellow-runner in terms of economic development, as it is a crucial reference point to the provincial-level units Qinghai, Ningxia, and Xinjiang. 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 of the „Great Western China Development Strategy“. Some may have expected Lanzhou to forever stay a languorous backwater with little self-induced power. But ultimately this great plan simply can’t be dismissed by a government that feels itself obliged to induce higher development levels in all corners of the country. New ideas had to follow in order to transform China’s northwest into a hotspot for investments. 

The year 2012 became a real turning point as the foundation of the local economy was radically altered by the State Council in Beijing. When evaluating Lanzhou’s economic outlook, we now actually need to distinguish two Lanzhous: The main city and the Lanzhou New Area (or Lanzhou Xinqu which means „new district“) which is currently under construction and expected to greatly influence Lanzhou’s economic well-being in the future. 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.

To create the Lanzhou New Area, allegedly 700 mountains were proverbially moved at biblical dimensions around the airport. 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 in Lanzhou depart. To make the New Area especially attractive, a free trade zone was founded, and, as Lanzhou plays a key role in the Great Western China Development Strategy, the proposals even extend beyond national 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 center of northwest China.

To most foreign investors interested in this specific region, Xi’an is currently still the primary destination. They perceive this city being the real gateway to the northwest as well as one to the central north of China. It surely is a vibrant place, a place full of change. But, China is still moving forward in a fast manner, and the need for diversification within China will increase. The question is whether a basically conventional mindset will still be the appropriate one in the years to come. While Xi’an is more and more developing into a megacity itself, Lanzhou and Zhengzhou are on their way to become very strong regional bases. We stated earlier that Lanzhou had been a backwater for a long time and that it needed unique support from the central government to jump-start its development. It now seems to be too early to tell if the city’s ambitious plans will work out. Therefore, let us compare Lanzhou with Xi’an and find out what distinguishes these two places when it comes to investment. 

The key message in this case is: “Pioneers invest now!” Wherever an important movement starts, it needs pioneers. Without pioneers, nothing great can be achieved. This was so in science, in politics, in business. Even when we break it down to the implementation of the Great Western Development Strategy, we can see that pioneers were crucial for the Chongqing and Chengdu success stories, not to mention the guys who invested in Guangdong and Shanghai early on. Their efforts and courage have been rewarded in many ways.

Why should your company consider to invest in Lanzhou? You may say you have a lot of choices where to go elsewhere in China. The country is like a continent in its dimensions. The answer is that here is a combination of new advantageous incentives and a potentially great future. 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 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 who invest early on. The fast infrastructural development does not just reflect Lanzhou’s commitment, but above all it shows the Chinese central government’s intention. 

Since the State Council provided Lanzhou with the New Area, the city has become a staging post for investors who are willing to take on new opportunities. There will be a lot of 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. The commitment of the Chinese government to this place is considerably strong, and this will clearly help early movers who aim to expand their business. 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 northwest China. 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

Links of interest

Lanzhou Positions Itself As New Belt and Road Economic Hub (ENCA)

China Goes West: A Ghost City in the Sand Comes to Life (The Guardian)

Along the New Silk Road, a City Built on Sand is a Monument to China’s Problems (Washington Post)

Xi Jinping’s Debt Clampdown Has Left a Trail of Dead Projects (Bloomberg)

Industries in Lanzhou (