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China’s AI Data Centers Move West, But Their Tax Revenue Stays East
Developed over time first seen 1 day ago
China is building data centres in western regions where land and electricity are cheaper, but the places hosting them may receive little of the tax generated by cloud and AI services. Ulanqab, in Inner Mongolia, illustrates the gap: companies can operate servers there while issuing customer invoices through businesses registered in eastern cities such as Hangzhou and Beijing. A local tax official said the centres contribute most to local tax receipts during construction; once operating, they leave mainly property, land and employee taxes. Ulanqab’s computing industry paid 368 million yuan in tax in 2025, less than 5 per cent of the city’s revenue.
The arrangement raises a question for China’s ‘East Data, West Computing’ programme: how can host cities turn new infrastructure into lasting local income? Tax receipts may grow while Ulanqab’s projects are being built, but that does not establish what they will yield after construction ends. Gui’an, in Guizhou province, offers a different example because some cloud providers issue invoices through companies registered there. Extending local computing businesses beyond server hosting could also help, though the scale of any future benefit remains uncertain.
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In short
- Western cities host data centres while service sales are often taxed where providers are registered.
- Ulanqab’s computing industry supplied less than 5 per cent of city revenue in 2025.
- Locally registered invoicing firms could help host areas retain more tax revenue.
How this story developed
- 3 hours ago China is building data centres in western regions where land and electricity are cheaper, but the places hosting them may receive little of the tax generated by cloud and AI services.
- The Diplomat China’s AI Data Centers Move West, But Their Tax Revenue Stays East
- Economic Observer Ulanqab, a hot land of computing power
- National Development and Reform Commission Western regions to gain computing power
Full account
China is directing a growing share of its data-centre construction towards western regions, where land and renewable power are more readily available. The policy is intended to connect those resources with demand for computing in the east, while supporting the expansion of the digital economy and more efficient use of energy. A 2022 account of the national plan said the authorities had approved eight computing hubs and ten data-centre clusters, and forecast annual investment of about $62.9 billion. It described the shift as part of a wider effort to coordinate data infrastructure and regional development.
Ulanqab, in Inner Mongolia, offers a local view of how that policy is taking shape. By the end of June 2026, the city had 89 signed computing-centre projects, up from 36 at the end of 2024. Projects are concentrated in areas including the Bayin core zone and the Yiwu Tang area, as well as sites elsewhere in the city and nearby counties and banners. On a visit in August, the Economic Observer found construction under way at several locations: some projects were still preparing their sites, while others had already begun operating. The report also noted that limited land-use allocations were becoming a constraint, with some signed projects yet to start.
The economic arrangement raises a question about where the benefits of the westward move accrue. The headline frames the issue as a gap between the location of infrastructure and the location of tax receipts: data centres are built in western areas, while revenue may remain in eastern ones. The supplied extracts, however, do not include the Economic Observer’s explanation or evidence on tax registration, local tax collection or the division of revenue. They establish the rapid growth of Ulanqab’s project pipeline, but do not by themselves quantify how much tax income stays elsewhere or explain the mechanisms involved.
The two reports approach the story at different scales and with different emphases. The 2022 China Daily report, carried on the National Development and Reform Commission’s website, sets out the national rationale: east-to-west resource allocation, renewable energy, investment and coordinated development. The 2026 Economic Observer report focuses on Ulanqab’s project count, construction activity and land constraints. The first presents the policy’s expected benefits; the second depicts its on-the-ground expansion. The extracts do not provide enough detail to resolve the tax question raised by the headline.
Where outlets differ
From the full account, which is AI-written from the sources:
The 2022 report is a national policy overview and discusses expected investment, energy efficiency and regional coordination; it does not address Ulanqab’s tax receipts.
The 2026 report is a local account of Ulanqab’s expanding project pipeline and land constraints. The supplied portion ends before explaining the headline’s claim about tax revenue, so that claim cannot be independently detailed from the extracts.