Posted: July 1, 2012 |  AUTHOR: KEN FOX | CONTACT ME


Ghenghis Kahn

Inner Mongolia is China’s first of five autonomous regions.* This region accounts for about one eight of China’s land mass. It has a population of about 24 million people. In contrast, the People’s Republic of Mongolia is a separate country with a population of 2.8 million, and has strong ties with Russia, and wants nothing to do with China or its government. I recently spent time in Inner Mongolia and found it interesting and quite revealing.

Along with another professor, I accompanied about a dozen university students on a Maymester credit course to China. Among the many places we visited was Hohhot, the capital of Inner Mongolia. I was surprised to see wind farms and solar panels along with statues and pictures of their local hero, Genghis Kahn. Hohhot is a city of old and new, with a beautiful new Inner Mongolia Museum. The population of Hohhot is approximately 2.9 million.

The major industries of Inner Mongolia include:
1. Energy power
2. Pharmaceuticals
3. Chemicals, including oil refining
4. Dairy products
5. Electronics
6. Assembly machinery

Inner Mongolia has vast grasslands which is perfect for raising livestock (sheep, cattle, etc.). Surprisingly, Inner Mongolia provides 60% of the world’s cashmere. The western part of Inner Mongolia is the location for China’s rocket firings into space. This area also produces most (70%) of the so called “rare earth” elements** that China is known for. These rare elements are used for high tech electronics, auto production and aerospace applications. Inner Mongolia also claims the largest coal fire plant in Asia. The northeastern part of the province has dense forests and produces lumber.

Key pillars of the Chinese government’s new Five-Year Plan are so called Strategic Emerging Sectors. One such sector will utilize the rare earth elements as part of China’s goal for cornering a dominant (70%) share of the world’s markets for: fluorescent lights, electric vehicle batteries, computers and electronics. Baotou, is a growing and prosperous new city in the western part of the province where the rare earths are generated. It is responsible for about half of China’s rare earth output. Another new and growing city in the central part of the province is Ordos, which has become a hub for wind power. Baotou could potentially feed the nearby wind turbine factories that require rare earth based permanent magnets. By 2015, China anticipates installing wind farms that can generate an additional 60 gigawatts of power, solar panels that will reach 10 gigawatts, and nuclear plants that will generate 40 gigawatts. These projects could consume as much as 40,000 tons of rare-earths magnets, according to official estimates.

Global awareness and China’s dominance of so called “rare-earths” was prompted by a relatively recent diplomatic incident between China and Japan. On September 7, 2010 a Chinese trawler, operating in disputed waters collided with a Japanese Coast Guard patrol boat near the Senkaku Islands (120 miles east of Taiwan, in waters controlled by Japan but claimed by both China and Taiwan). There were several Japanese Coast guard boats involved. Subsequently, Japan detained the Chinese skipper (Zhan Qixiong). When China’s repeated demands for the release of the skipper were refused and his detention extended for an additional 10 days, the Chinese government cancelled official meetings with Japan. Although denied by the Chinese government, it was reported that China halted exports of rare earth minerals to Japan. Eventually, the Chinese crew members were released.

Currently, China controls 95% of the rare earth production. Most of its rare earth exports, about 70%, go to Japan. The Chinese market for rare earths is highly fragmented with thousands of small producers. China’s efforts to restrict rare earth exports and exert price leverage have unintentionally driven global rare earth production. Looking for alternative production sources, the U.S.’s Molycorp has reopened a closed mine in California, and Australia’s Lynas Corporation has begun developing its Mount Weld mine to produce rare earths.

My trip to Inner Mongolia included an overnight stay in a “yurt” type resort (shown above). This grouping of more modern equipped yurts (e.g., concrete structures, with electricity, bathrooms with running water), offered special roasted lamb dinners and Mongolian shows with singing and dancing, along with Mongolian horseback riding and wrestling demonstrations, will increasingly attract seasonal tourists to the area.

We also toured a Yili Industrial Group ultra modern dairy production facility near Hohhot. We drove past traffic lights that had both solar panels and mini wind turbines to power them, It was quite impressive and is an example of the blend of old and new, and adoption of new technologies in this region. Inner Mongolia is a region of China I believe is often overlooked but has tremendous potential for continued economic vitality and industrial growth.

*A China Autonomous Region is a first level administrative subdivision. It has more legislative rights than a province. This type of region is a minority entity which has a higher population of a particular ethnic group. The other China autonomous regions are: Uyghurs in Xingjiang , the Tibetans in Tibet, the Hui in Ningxia and the Zhuang in Guangxi.
** A set of 17 chemical elements in the periodic table, with names such as: Lanthanum, Scandium, Cerium, Neodymium, etc..

Additional reference: “China Digs In,” by Damien Ma, Foreign Affairs, April 25, 2012

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