Lanzhou new area plan to begin with 'mountain-moving project', but financial and environmental wisdom of project questioned

A long, long time ago, an old Chinese peasant named Yu Gong decided to move two inconveniently located mountains away from blocking the entrance to his home. Legend has it he struggled terribly, but ultimately succeeded. Hence the Chinese idiom "Yu Gong moves the mountains." Where there's a will, there's a way. Now Chinese developers are putting old Yu to shame.

In what is being billed as the largest "mountain-moving project" in Chinese history, oneof China's biggest construction firms will spend £2.2bn to flatten 700 mountains levelling the area Lanzhou, allowing developers to build a new metropolis on the outskirts of the north-western city.

The Lanzhou New Area, 500 square miles (130,000 hectares) of land 50 miles from the city, which is the provincial capital of arid Gansu province, could increase the region's gross domestic product to £27bn by 2030, according to the state-run China Daily. It has already attracted almost £7bn of corporate investment.

The project will be China's fifth "state-level development zone" and the first in the country's rapidly developing interior, according to state media reports. Others include Shanghai's Pudong and Tianjin's Binhai, home to a half-built, 120-building replica of Manhattan. China's state council, its highest administrative authority, approved the Lanzhou project in August.

The first stage of the mountain-flattening initiative, which was reported on Tuesday by the China Economic Weekly magazine, began in late October and will eventually enable a new urban district almost 10 square miles in size northeast of downtown Lanzhou – a small, but important part of the Lanzhou Nnew area project to be built.

One of the country's largest private companies: the Nanjing-based China Pacific Construction Group, headed by Yan Jiehe, is behind the initiative. The 52-year-old former teacher is portrayed in China as a sort of home-grown Donald Trump – ultra-ambitious and preternaturally gifted at navigating the country's vast network of "guanxi", or personal connections.

Yan was born in the 1960s as the youngest of nine children. After a decade of working as a high-school teacher and cement plant employee, he founded his construction firm in 1995 and amassed a fortune by buying and revamping struggling state-owned enterprises. In 2006 the respected Hu Run report named Yan – then worth about £775m – as China's second-richest man.

His latest plan has evoked a healthy dose of scepticism. Lanzhou, home to 3.6 million people alongside the silty Yellow River, already has major environmental concerns. Last year the World Health Organisation named it the city with the worst air pollution in China. The city's main industries include textiles, fertiliser production and metallurgy.

Liu Fuyuan, a former high-level official at the country's National Development and Reform Commission, told China Economic Weekly that the project was unsuitable because Lanzhou is frequently listed as among China's most chronically water-scarce municipalities. "The most important thing is to gather people in places where there is water," he said.

Others also pointed to the financial risk of building a new city in the middle of the desert. "All this investment needs to be paid back with residential land revenue, and I don't see much on returns in these kinds of cities," said Tao Ran, an economics professor at Renmin University in Beijing. "If you have a booming real estate market it might work, but it seems to me that real estate in China is very, very risky."

In an email interview, a China Pacific Construction Group spokeswoman dismissed criticisms of the project as unjustified. "Lanzhou's environment is already really poor, it's all desolate mountains which are extremely short of water," said Angie Wong. "Our protective style of development will divert water to the area, achieve reforestation and make things better than before."

Yan's plans could be considered "a protective style of development, and a developmental style of protection", she said, adding: "I think whether it's England or America, or any other country, no one will cease development because of resource scarcity caused by geography."

A promotional video posted on the Lanzhou new area website shows a digitally-rendered cityscape of gleaming skyscrapers and leafy parks. Against a driving operatic score, the camera zooms out from a large government building to reveal features of the area's imagined urban topography: a clock tower, a new airport, an oil refinery, a light-rail system, and a stadium packed with cheering fans.

The new area "will lead to an environmentally sustainable economy based on energy-saving industries" including advanced equipment manufacturing, petrochemical industries and modern agriculture, wrote Chinese Central Television on its website.

The Lanzhou city government could not be reached for comment.