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Ulanqab emerges as central hub for Chinese AI data centers amid resource strains

Tech firms are expanding compute clusters in Inner Mongolia due to low power costs and proximity to Beijing, but water scarcity and coal reliance remain hurdles.

Updated Aug 24, 2026 · 00:33 UTC1 reports

The short version

  • Tech companies including ByteDance, Alibaba, and DeepSeek are constructing large-scale AI data centers in Ulanqab, Inner Mongolia.
  • The city has attracted 12.5 gigawatts in pledged compute capacity due to low-cost electricity, a cold climate, and low latency connections to Beijing.
  • The rapid expansion is straining local resources, facing critical water shortages in an arid region and relying on coal for roughly 37 percent of its electricity.
  • A key uncertainty is whether local infrastructure and renewable transitions can keep up as new facilities come online.

Key facts

  • Nearly 100 data centers have opened or started construction in Ulanqab since 2016, with pledged projects totaling an estimated 12.5 gigawatts in capacity.[Wired]
  • Over 70 percent of Ulanqab's total data center commitments were announced within the past year, according to a Goldman Sachs research note.[Wired]
  • Major Chinese companies investing directly in their own Ulanqab infrastructure include ByteDance, Alibaba, Xiaohongshu, DeepSeek, and wind turbine manufacturer Envision.[Wired]
  • Ulanqab receives roughly 14 inches of rain annually, and the local water utility recently shut off several waterworks for seven hours each night to manage peak consumption.[Wired]
  • Approximately 37 percent of Ulanqab's electricity continues to be generated from coal, despite growing wind and solar deployment.[Wired]

What remains uncertain

  • The timeline and feasibility of fully transitioning the region's around-the-clock data center energy demand from coal to renewable power remain unknown.[Wired]
  • It is unclear how the municipal government will balance residential water requirements against the cooling needs of upcoming data centers as more facilities become operational.[Wired]

Sources