In Lanzhou New Area, recently completed apartment buildings await residents. Photo: Gilles Sabrié / Washington Post

By Simon Denyer
29 May 2016

LANZHOU NEW AREA, China (Washington Post) – This city is supposed to be the “diamond” on China’s Silk Road Economic Belt — a new metropolis carved out of the mountains in the country’s arid northwest.

But it is shaping up to be fool’s gold, a ghost city in the making.

Lanzhou New Area, in Gansu province, embodies China’s twin dreams of catapulting its poorer western regions into the economic mainstream through an orgy of infrastructure spending and cementing its place at the heart of Asia through a revival of the ancient Silk Road.

Hundreds of hills on the dry, sandy Loess Plateau were flattened by bulldozers to create the 315-square-mile city. But today, cranes stand idle in planned industrial parks while newly built residential blocks loom empty. Streets are mostly deserted. Life-size replicas of the Parthenon and the Sphinx sit surrounded by wasteland, monuments to profligacy.

The project epitomizes what is wrong with China’s economic model, foreign experts say — in particular, how debt is rising to alarming levels as the government tries to prop up a slowing economy with projects that make little or no commercial sense.

“Where Gansu goes, China goes,” said Rodney Jones, founder of Wigram Capital Advisors in Beijing. “You’ve had massive credit growth and investment in projects that don’t generate an economic return.

“Now you’re facing two shocks — you’ve got to stop credit growing and deal with the bad loans, and you’ve also got to see how the economy expands once this credit boom is over.”

China launched an ambitious “Go West” campaign at the turn of the millennium, aiming to narrow the income gap between the booming eastern seaboard and the remote west, essentially by building modern infrastructure and exploiting the west’s natural resources.

The initiative got a huge fillip as China launched a nationwide economic stimulus after the 2008 global financial crisis. And President Xi Jinping’s plans to revitalize the Silk Road, the ancient desert trade route between East and West, have provided a further boost.

About $10 billion is being invested to clear Lanzhou New Area and build infrastructure that includes roads, railways and an expanded airport. Water is being diverted from a branch of the Yellow River and stored in three new reservoirs to create a city that a promotional video shows as awash with lakes and rivers.

A free-trade zone and logistics hub are meant to ensure that the city benefits from its location on a new Silk Road, while industrial parks dedicated to auto and equipment manufacturing, petrochemicals and traditional Chinese medicine are supposed to create the jobs that will sustain a city of 1 million by 2030. [more]

Along the new Silk Road, a city built on sand is a monument to China’s problems

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