Cheap Power and Cool Climate Make It a Strategic AI Hub Solar and Wind Installations Across Mountains, 50 Data Centers Clustered Overcapacity and Local Debt Cast Shadow Behind Overwhelming Generation
At the Huajiang Grand Canyon Bridge observation deck in Guizhou Province, southwestern China, visited last month on the 29th, rectangular-shaped objects of unidentifiable nature were densely attached across mountainsides, visible through clouds wrapping around the endlessly stretching mountain ranges. At first glance, they resembled perennial snow or clouds, but they appeared somewhat foreign to be considered part of nature.
Their identity became clear on the way back to the airport. They were solar panels. Driving along the highway for over three hours, clusters of panels — easily numbering in the hundreds — were spotted distributed across the mountains. Black panels of identical specifications were attached without any gaps, evoking a sense of trypophobia.
In addition, after descending from the bridge observation deck and as the clouds cleared, wind turbines towering over each mountain peak also caught the eye. Although the cloudy weather limited visibility, more than 10 turbines were installed within sight alone.
Guizhou Province, where all of this was witnessed, is the province with the lowest income level in China. Although it covers an area 1.75 times that of South Korea, 92.5% of it consists of mountainous terrain, and as a region densely populated by ethnic minorities, it had been thoroughly marginalized until recently. It had been widely known only as the hometown of Maotai, China's finest liquor.
Recently, however, it has emerged as a strategic location for energy generation and data centers. This is because China has designated Guizhou — rich in natural resources and able to maintain consistent temperature and humidity year-round — as its western energy hub. The place once known only for Maotai is now rising as a core development area in the AI era.
China's Ultra-Low-Cost AI Offensive Riding on the West's Cheap Power Grid
Recently, China's large language models (LLMs) have been attracting consumers through a striking ultra-low-cost offensive. In particular, AI agents such as "OpenClo," which has gained rapid momentum recently, require token (the basic unit by which AI recognizes text) call volumes hundreds to thousands of times greater than existing chatbot services, making token unit costs critically important.
Overall, China's API call prices are only one-fifth to one-twentieth the level of major U.S. models. DeepSeek, which released its V4 model in April, decided to permanently offer a 75% discounted rate, presenting prices of $0.0036 (about 5.4 won) for input and $0.87 (about 1,307 won) for output per million tokens. This is 97.1% cheaper for output prices and a remarkable 99.9% cheaper for input prices compared to OpenAI's latest model, "GPT-5.5."
The secret behind such ultra-low pricing lies in various factors, including efficient design that accounts for semiconductor bottlenecks, but above all, the key is power cost competitiveness leveraged through China's vast territory. Industrial electricity rates in China's northwestern regions are around 0.24 yuan (about 49 won) per kWh, only one-third of South Korea's level (about 180 won).
This strength stems from China — heavily dependent on oil imports — having established power infrastructure early on for energy security purposes. Since the late 1990s, China has built power infrastructure in the sparsely populated and geographically vast western regions through the "West-East Power Transmission" project (西电东送). Since 2022, it has been carrying out the "East Data, West Computing" project (东数西算), which intensively installs wind and solar power generation hubs. As a result, the share of renewable energy has surpassed 60% of total power generation facilities, and as of March of last year, wind and solar installations reached 1,482 GW, achieving the 2030 target (1,200 GW) ahead of schedule. Total annual power generation last year reached 9.72 trillion kWh, equivalent to the combined level of the United States, the EU, and India.
Guizhou has rapidly emerged as a core region within the West-East Power Transmission project. Originally rich in coal and hydropower, the share of wind and solar facilities has also been rapidly increasing recently. As of last year, installed power capacity was 88.81 million kW, up 23% from a year earlier. With electricity rates below 0.35 yuan per kWh — 30% cheaper than the national average — and a cool climate suitable for data center operations, it is also emerging as an AI data center hub. There are 50 corporate data centers either operating or being newly constructed here. Not only Chinese companies such as Huawei, Tencent, Alibaba, and China Mobile, but also global big tech firms such as Apple have chosen Guizhou Province as a data center location. In 2022, China designated Guizhou Province as one of the eight national computing power hubs.
Companies in Cutthroat Competition, Local Governments in Debt Quagmire
While China has secured global competitiveness with overwhelming generation capacity, cries of distress are emerging from within. The "top-down" approach, in which numerous companies emerge once the government designates core industries, is cited as a chronic problem. As supply overwhelmingly exceeds demand, companies engage in cutthroat price-cutting competition for survival, and only a handful of companies survive in the end.
Solar power is a representative case. As of last year, China's solar production capacity was nearly twice the level of global demand. Major companies are suffering massive losses due to overproduction and price wars. There have been reports that the combined losses of major Chinese solar manufacturers in 2025 will exceed 50 billion yuan. The situation is relatively better for wind power, but in October 2024, 12 turbine companies signed a voluntary agreement to maintain a fair competition environment. In effect, the industry itself declared, "Let's stop competition that slashes prices too aggressively."
Battery companies that produce energy storage systems (ESS) — essential for clean power generation — are in a similar situation. Chinese battery companies have captured more than half of the global electric vehicle battery market, led by CATL and BYD, and account for more than 90% of global shipments in batteries for energy storage systems. However, internal conditions are far from easy. China's lithium-ion battery production capacity already exceeded 2 TWh in 2024, 60% more than total demand, and analyses suggest that planned capacity will exceed 6 TWh. As a result, the price of LFP cathode materials plummeted from 173,000 yuan per ton at the end of 2022 to 34,000 yuan in August 2025. This is why the Chinese government summoned major battery companies earlier this year and demanded mitigation of overproduction risks and normalization of market competition.
The Guizhou government has also fallen into mountains of debt due to excessive investment. This is because local governments, hungry for performance results, made excessive investments in various infrastructure projects to boost growth rates. Li Zaiyong, former Vice Chairman of the Guizhou Provincial Committee of the Chinese People's Political Consultative Conference (CPPCC), was sentenced to a death sentence with a two-year reprieve in August 2024 on charges of bribery as well as causing serious debt risks through showcase development projects and illegal borrowing. Hong Kong's South China Morning Post (SCMP) described Guizhou's debt as the result of "more than a decade of expensive project investments," pointing to the bare reality behind the dazzling development.
Original reporting by Chung Da-eun, Beijing Correspondent for Seoul Economic Daily.
AI-translated from Korean. Quotes from foreign sources are based on Korean-language reports and may not reflect exact original wording.
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