Economy

Genghis Khan’s billionaires

You might be surprised to discover where China second richest city is…

Legend has it that Genghis Khan stopped at Erdos to admire the area’s lush grasslands and herds of deer. He was so captivated by the place he decided to build his mausoleum there.

Eight centuries on and the picturesque landscape is now being replaced with much more of an industrial vista.

But the 1.5 million people of Erdos are not complaining. With 167 billion tonnes of coal lying beneath their feet, they are now living in China’s second richest city.

Situated in Inner Mongolia, this once impoverished backwater is transforming into a boomtown. Erdos’ GDP per capita passed $10,000 in 2008, higher than Beijing’s $7,200 (and trailing only Shanghai’s $10,529). But with faster growth than Shanghai in the first half of the year, it may now be richer.

“Changes in Erdos in recent years have been very dramatic,” says Fan Shutang, deputy party secretary of Erdos Holdings. “And that’s all because of coal.”

The city, home to some of the country’s largest coal producers like Shenhua and Yitai, boasts a sixth of the country’s coal reserves.

Last year, Erdos’ 276 mines delivered a total of 155.5 million tonnes of coal. While coal has been the main driver for Erdos’ economic growth, the city is also well endowed in natural gas and other minerals like limestone.

Indeed, experts also estimate that Erdos has more than 800 billion cubic metres – or a third – of the country’s natural gas reserve. Its Sulige gasfield discovered in 2007 is by far the largest single find in China.

As the local economy grows, the property market has flourished too. Local billionaire Cai Jiang, who made his money in coal and dairy before turning more recently to real estate, has commissioned 100 architecture firms from around the world to design individual villas, each large enough to include amenities like servants’ quarters and indoor pools. Quite a display for a region in which many local families have traditionally lived in tents (or yurts).

Hotels, restaurants and grandiose government buildings are also in the works.

“Museums, theatres, art centres, sports clubs, so on and so forth are being built,” declares Liu Henwen, Deputy Director of Erdos City. “The new library is as big as a football field,” he adds enthusiastically.

Mining can also lead to environmental damage, of course.

So the local government has been spending on greening projects. Shenhua has invested Rmb60 billion in the world’s largest coal liquefaction plant to make clean fuel (see WiC12).

What of Erdos’ future? Like many cities with a fortune dependent on natural resources, the road ahead can look a lot less enticing when the resources run out.

Notable examples of cities struggling to reinvent themselves include formerly coal-rich Fuxin in Liaoning and metal town Tongling in Anhui province (see WiC9).

No worries, say Erdos officials. At current rates of extraction, coal reserves will last a thousand years.

Besides, there is a fallback plan – cashmere.

It may not look like an obvious synergy for an industrial powerhouse. But the city is also a leading centre for cashmere, with more than half the world’s supply coming from the region.

Over 30% of world production is processed and sold by the eponymous Erdos Group. The company now exports 5 million cashmere sweaters annually, under the motto “Erdos Sweaters Are Keeping the Whole World Warm”.


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