NANCHANG, Sept. 10 (Xinhua Finance) — Reporters Cui Lu, Chen Yongqiang and Zhang Xinxin recently visited the two major computing power hub nodes of Qingyang in Gansu and Zhongwei in Ningxia, where data center construction continues to accelerate and rack shortages have become commonplace in some industrial parks. Behind the building boom, however, midstream data center builders and operators remain under pressure from thin leasing margins, high infrastructure costs and lengthy investment cycles.

Rack Demand Surges as Projects Await Construction

In early autumn, reporters visited the Smart Blueprint Western AI Data Center project in the East Data West Computing Industrial Park in Qingyang, Gansu. Heavy rain had temporarily slowed construction, but pile drivers and large quantities of building materials remained visible at the site.

Chang Sheng, chairman of the project's investment company, said the first phase comprises three data center buildings with 8,860 planned high-density racks and up to 108,000 P of computing power. Construction is being accelerated because customers want the racks delivered before the end of October.

At China Telecom's Qingyang Computing Power Center, part of the national East Data West Computing hub, the first two floors of a steel-framed building have begun to take shape, with cranes hoisting steel components to the third floor. Yang Zhiwen, deputy director of on-site operations and maintenance, said steel-frame construction enables faster building and delivery than conventional civil engineering. Three data center buildings are currently under construction, while the one already in operation has been fully contracted to a major customer.

Data center construction is also accelerating in Zhongwei, Ningxia. Ma Zhenjun, deputy director of the Zhongwei Data Bureau, said local data center development is growing rapidly, with some companies effectively holding orders while waiting for projects to be built.

Demand growth is a major driver of the current construction boom. According to the National Data Administration, China's average daily token calls had exceeded 140 trillion by the end of March 2026, more than 1,000 times the level at the start of 2024.

Hu Zhiyong, deputy Party secretary and mayor of Qingyang, previously said at a press conference that several of the world's most-used large models had been deployed in the city. Qingyang's average daily token calls rose roughly tenfold, from 1.2 trillion in 2023 to 12 trillion in 2025.

Data from the China Academy of Information and Communications Technology showed that domestic demand for AI computing power rose 417% year over year in the first quarter of 2026, while supply grew 128%.

Thin Leasing Margins and Rising Capital Pressure

The investigation found that although some data center projects have secured leasing orders, builders and operators have not fully captured the gains from rising demand.

Yang said it typically takes eight to 10 years to recoup the full investment in a data center building. An executive at a data center investment company in Ningxia likewise said that while major customers require substantial computing power, their strong bargaining position could continue squeezing data center margins.

Interim reports from several publicly traded Chinese midstream computing power companies reflected similar pressure. In the first half of 2026, third-party data center operator Beijing Sinnet Technology generated revenue of 3.332 billion yuan, down 10.34% year over year, while net profit attributable to shareholders fell 47.09% to 61 million yuan. Shanghai AtHub reported revenue of 782 million yuan, down 3.57%, with its computing power business contributing just 2.4 million yuan, or less than 1% of the total.

Heavy infrastructure spending is also driving up data center construction costs. Chang said civil works account for roughly one-third of total investment and electromechanical systems for about two-thirds. These systems use significant amounts of copper, making higher copper prices a direct source of cost inflation.

As computing power equipment is upgraded, data centers also require high-density retrofits for cooling, power supply and distribution, and load-bearing capacity. Chang said traditional air cooling may no longer provide sufficient heat dissipation as rack power density rises, forcing projects to adopt technologies such as liquid cooling and increase server-room ceiling heights. Some older data centers may face retrofitting or even idling because their ceilings are too low.

The capital-intensive nature of the business is also evident in corporate expansion plans. Range Technology's AIDC revenue reached 1.995 billion yuan in the first half of 2026, up 126.24% year over year and surpassing its traditional IDC business for the first time. Its balance of construction in progress also increased over the same period.

Lettall Electronic generated 1.274 billion yuan in computing power business revenue during the same period, up 162% year over year. It also proposed a 5 billion yuan private placement, with 4 billion yuan earmarked for an AI data center in Zhongwei, Ningxia.

Expanding Computing Power, Raising Utilization and Cutting Energy Use

To address thin margins, heavy investment and long payback periods, data center builders and operators are looking to expand computing power capacity, improve rack utilization and reduce energy costs.

The first approach is to increase capital expenditure and expand the supply of computing power. In the first half of 2026, China Mobile recorded capital expenditure of 61 billion yuan, including 15.6 billion yuan invested in its computing power network, up 71% year over year. China Telecom's capital expenditure totaled 32.4 billion yuan, with investment in its computing power network rising 97% and accounting for 48% of the total. China Unicom spent 24.1 billion yuan, with computing power investment increasing by more than 80% and its share rising to 37%.

China's three major telecom operators continue to increase investment in computing power infrastructure to meet growing demand for large-model training and inference.

The second approach is to plan rack resources more effectively and raise occupancy rates. Beijing Sinnet Technology said it is steadily advancing construction of data centers under development to ensure timely delivery of existing orders while further increasing occupancy at operational facilities. The company also plans to step up marketing for existing server rooms to attract high-quality customers and improve utilization.

Reducing energy costs is another priority for data center operators. Interviewees said electricity typically accounts for about 60% of data center operating costs, making closer coordination between computing power and electricity supply an important way to reduce expenses.

Some industrial parks are now working with grid operators and renewable energy companies to integrate green power into data center energy systems. A 500-megawatt photovoltaic power station at China Datang's cloud base in Zhongwei began operating in May 2026. Once the first phase is completed, the project is expected to supply 2.29 billion kilowatt-hours of electricity annually to the cloud base through direct green power delivery.

Qingyang, meanwhile, has used green power aggregation to lower delivered electricity prices in its industrial parks to less than 0.4 yuan per kilowatt-hour.

Overall, demand for AI computing power continues to grow rapidly, sustaining strong data center construction and rack demand. For midstream companies, however, more orders do not necessarily translate into higher profits. Construction costs, energy prices, rack utilization, customers' bargaining power and long investment payback periods will continue to determine the actual returns of data center projects.