Inner Mongolia set to become powerhouse

PUBLISHED : Monday, 11 June, 2007, 12:00am
UPDATED : Monday, 11 June, 2007, 12:00am
 

Economic growth picking up pace


When Genghis Khan reined in his horse eight centuries ago at an oasis in Ordos, now part of the Inner Mongolia Autonomous Region, little would he have known of the area's massive underground fossil fuel reserves that could help quench China's thirst for energy.


Beneath shrinking pastures and swelling deserts are buried at least 310 billion tonnes of coal, a recently proven reserve that is almost 50 per cent larger than previously estimated, catapulting the region to become the country's No1 coal-mining base ahead of Shanxi, says the autonomous region's head, Chu Bo.


Inner Mongolia's coal output is expected to rise 75 per cent this year to about 350 million tonnes.


The output will help meet surging demand for coal to power the country's booming economy. The mineral supplies 70 per cent of the country's energy needs and generates 80 per cent of its electricity,


The region's other abundant natural resources, which include oil and gas, and access to the Yangtze River, drive growth at enterprises like Baotou Iron & Steel Group, the unlisted parent of two rare earth-processing and steel-making units in Shanghai - Elion Resource Group, a producer of petrochemicals and cement; and car-maker Huatai Automobile Group.


These companies plan to go public, either in Hong Kong or Shanghai, in the next couple of years, company officials say, declining to give details.


'We aim at having half of our economic growth generated by non-industrial activities by the end of the 11th Five-Year Plan in 2010, from 38 per cent at present,' Mr Chu said.


Last year, Inner Mongolia's economy soared 18 per cent to 479 billion yuan, making it one of the country's fastest growing regions.


Agriculture accounts for a significant portion of its economic growth.


The autonomous region's grasslands nurture tens of millions of sheep and cattle, setting the stage for punishing competition between China's two largest dairy product producers, Hong Kong-listed China Mengniu Dairy and Shanghai-listed Inner Mongolia Yili Industrial Group, and the country's two biggest hot-pot restaurant chains - Little Sheep and Little Lamb.


The dairy firms are set to extend their competition to overseas markets including Russia and Southeast Asia, while the two Baotou-based hot-pot chains are widening their focus from dining tables to the stock market. Little Sheep plans to raise up to HK$2 billion by listing in Hong Kong, while Little Lamb plans to serve up its shares in Shanghai to raise one billion yuan as soon as next year. The money raised will help the two extend their operations to Europe, North America and Japan.


Mengniu marketing vice-president Zhao Yuanhua says the group plans to tap new markets such as Vietnam, where the company is mulling setting up jointly owned or wholly owned cattle farms.


'The mainland market has provided us with a strong base for overseas expansion,' Ms Zhao said at the group's Hohhot cattle farm, which with more than 10,000 heads of cattle is Asia's biggest. 'We expect 15 per cent of sales to come from non-mainland markets in 2011, up from a few per cent at present.'


While these Inner Mongolian companies are looking outside of their home turf, some Hong Kong-listed firms, particularly upmarket hoteliers, are pouring investments into the autonomous region's hotel and property sectors.


Attracted to Inner Mongolia by the economic takeoff and thriving tourism activity, Shangri-La Asia has spent a combined US$190 million to build three hotels in Hohhot, Baotou and Manzhouli, while Shanghai Jin Jiang International Hotels (Group), via a subsidiary, is spending 950 million yuan to construct a 1,000-room hotel in Hohhot, according to senior municipal government officials.


Gary Biondo, general manager of the 380-room Shangri-La hotel, does not fear that a sudden flood of five-star tourist beds will bring about indigestion in the market.


'Any developed city needs a variety of five-star hotels to meet the different needs of travellers, whether they are visiting for business or leisure,' he said. 'We welcome the competition.'


Communist Party of China Hohhot Committee secretary Han Zhiran forecast that the city's economic growth would hit 200 billion yuan in 2010, from 90 billion yuan recorded last year.


Shangri-La is part of Kerry Group, which publishes the South China Morning Post.


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