Asia briefing: Create the infrastructure and the investors will come
Asia Briefing found itself last week in Yinchuan, capital of the Ningxia region, which was once a feature of the ancient Silk Road, and we were again reminded that one of the great principles on which China’s recent success has been built is the “Field of Dreams” principle, the idea that “if you build it, they will come”.
Chinese authorities, flush with cash either borrowed or gleaned from land grabs, or tax revenues, have proven skillful at building infrastructure, which then fills with investors.
As the capital city of the Ningxia Hui Autonomous Region, which is home to more than 10 per cent of China’s 20 million Muslims, city authorities are keen to develop the city as an exchange point between Chinese and Arab cultures.
The city has a large Muslim population – Hui Muslims make up 24 per cent of the city’s population – and every year it hosts the China-Arab State Expo, a platform for promoting trade between China and the Muslim world.
Trade between China and Arab countries increased 14 per cent year-on-year to a record high of $222.4 billion (€164 billion) last year.
“Ningxia is an important stop on the Silk Road, where the Chinese and Arab civilisations have traditionally interacted on each other, and the Hui people in Ningxia share many similarities in terms of culture, religion and customs with the Arab people,” Liu Hui, chairwoman of the autonomous region, told a conference to launch the Expo.
The Chinese authorities seem keen to leverage these ancient links.
Last year, the state council approved a plan to construct a vast inland economic zone in Ningxia and the skyline is filled with cranes building the Yinchuan Yuehai Bay CBD, a vast project that has as its centrepoint a China and Arab Axis, lined with the flags of Arab countries.
At the World Muslim Tour Operators Conference 2013 in Yinchuan, tourism contracts with a total value of three billion yuan (€360 million) were signed between the Chinese tour operators and their counterparts from more than 20 countries and regions.
Last week, authorities in Yinchuan announced a “Silk Road in the Sky” linking eastern and western Asia, aimed at cutting the distance between China and the United Arab Emirates and providing new development opportunities for Arabian countries.
Ningxia is now on track to become a major trans-shipment port between China and the mid-east.
It’s a far cry from the Athlone hub, which has struggled to find investment and has had to constantly reinvent itself in the absence of any major state backing.
Last year, Hanas put into operation its liquefied natural gas (LNG) plant in Yinchuan, the largest of its kind in the country. The company’s main business is LNG production, gas-fired cogeneration projects for heating and power and urban gas networks.
“We see our LNG business as a core company strategy for Hanas in the coming years. We are always introducing new technology to help with producing LNG. Gas is a big part of our operations, and we can export this, but it is very difficult to exploit, because it is deep underground and other things,” said Du Yanzhong, chairman of Ningxia Hanas New Energy Group.
“You need equipment and technology and you need investment.”
The plant, which is located 16 kilometres away from Yinchuan, was established to help guarantee sustainable energy supplies in China’s western region while also promoting the development of the country’s new energy industry.
China is the world’s second-largest energy consumer and producer and LNG is a big issue in China right now. China is expected to have an annual natural gas consumption of 260 billion cubic metres by 2015, and Sanford C Bernstein & Co reckons the number of vehicles fuelled by LNG in China will rise 10-fold to 800,000 by 2020.
LNG, which is mainly methane, refers to natural gas that has been converted to liquid form for ease of storage or transport. Mr Du pointed proudly to a photograph of a large fleet of trucks which the company uses to transport its liquid natural gas around the region.
Hanas was founded in 2010 and is still a small player but the Chinese market is very large and the need for better energy solutions, including wind and solar, will create plenty of opportunities for Hanas.