[Asia Report] ASEAN's Economic Dependence on China Accelerates with High-Speed Rail Construction

From Yunnan to Vientiane: 1,000 km in 10 Hours
Laos Sees Surge in Agricultural and Raw Material Exports
$2 Billion Debt to China Raises Concerns
Growing Dependence on Chinese Economy Possible

Thailand's Bangkok is bustling again after COVID-19. From the airport to tourist spots, there is barely any space to step among foreigners. The university districts, which had long been stagnant, have also regained vitality. Recently, the biggest visitors to Thai universities are none other than Chinese international students. The enormous economic impact created by these precious guests, who cannot speak a word of Thai, has even made university authorities anxious. It is interesting that young Chinese people do not only yearn for advanced countries like the United States and Europe. Young Chinese are also dreaming of various global businesses based on their studies in Asian international cities such as Bangkok, Singapore, and Manila. In particular, the popularity of Bangkok, an international city with low living costs and open to the world, is soaring.

High-speed train connecting China and Laos AFP Yonhap News

◇Geopolitics Changed by Railroads= An interesting interpretation is that this is because the geopolitical status of Southeast Asia centered on Bangkok has changed. In the past, flying was almost the only way to get from China to Bangkok. But now, since a high-speed railway has been laid from Kunming (昆明), Yunnan Province, to Vientiane, Laos, land routes have become possible. Vientiane, the capital and historic city of Laos, borders Thailand across the Mekong River. Thailand and Cambodia, once far from China, have suddenly become neighbors of China. China is a ‘land of railroads’ that connects the entire continent with cutting-edge high-speed rail. This momentum is now extending beyond its borders to the entire Asian continent, with the ASEAN Express running from Kunming, the southwestern gateway of the continent, through Laos, leading the way.

Passing through the 1,050 km border area, which was once blocked by rugged mountain ranges and waterways and took more than three nights and four days, now takes only 10.5 hours including customs clearance. The Laos section (417 km), considered a difficult construction, was completed in December 2021 after an investment of 7 trillion won, equivalent to one-third of Laos’s GDP, starting in 2015. Since it was built with Chinese capital and technology, the entire system is entirely Chinese-style. Especially, China’s technology was fully mobilized, with 61 km of bridges and 198 km of tunnels on the Laos section alone.

This high-speed railway mainly focused on freight transport due to China’s ‘zero COVID’ policy but began full-scale passenger transport across the border from April this year. With freedom of movement granted, it is natural that the train to Laos is explosively popular. Nearly 11,000 tons of freight traveled the route daily for almost two years, and the total number of passengers exceeded 2 million by the end of August, showing a hot response.

Crew members are performing in traditional costumes on the high-speed train connecting China and Laos. Photo by AP Yonhap News

◇China’s Economic Territory Expands Southward…Fruits Heading to China= The expansion of China’s high-speed rail system into Southeast Asia is a key project of the southern Belt and Road Initiative. The ultimate goal is to connect Bangkok through the Malay Peninsula to Singapore. While there are routes southward from China through Laos, Myanmar, and Vietnam, Laos was chosen first because it warmly welcomed China’s infrastructure investment. Laos, a landlocked country, has the weakest ‘anti-China sentiment’ and lacks a seaport connected to the sea, resulting in the slowest economic development. With a small population and insufficient technology, railway construction was out of the question, but China opened the blocked channel.

The most notable fact during the 22 months of operation of the Kunming-Laos high-speed railway after its opening is that 90% of the freight volume heads from Laos to China. Although Laos’s manufacturing industry is weak and it might be expected to import many Chinese-made goods, the opposite phenomenon is occurring. Major products exported to China include fruits, cassava flour, barley, rubber, and iron ore. China is sourcing agricultural products and raw materials it lacks through Southeast Asia. Among these, the most interesting items are fruits. Southeast Asian specialties such as durian and mango are being sucked into China via the high-speed railway. To this end, the railway operates refrigerated freight trains equipped with cold chain facilities. The demand for Southeast Asian fruits absorbed by China is truly enormous, and to ensure a stable supply of durian, the most expensive fruit, a dedicated farm of 50 km² (six times the size of Yeouido) was established in Laos last year. The price increases of mangoes and lychees are also thanks to China’s domestic demand. Previously, freight trucks were used in neighboring Thailand and Vietnam, but now fresh seasonal fruits can be transported via the Laos high-speed railway, marking an era where Southeast Asia is responsible for the dining tables of China’s middle class, which has entered the $20,000 income era.

Chinese state media such as Xinhua News Agency and CGTN are also extensively packaging the entry into Laos as ‘promoting friendship’ and ‘mutual benefit’ to revive China’s sluggish economy and the Belt and Road Initiative, which has fallen into a swamp. Hidden in this is a message to expand China’s influence not only in Laos but throughout the Association of Southeast Asian Nations (ASEAN). Additionally, the traditionally undeveloped southern region of Yunnan Province is also considered a major beneficiary. In any case, China’s economic territory has greatly expanded southward.

This year, Chinese investment in Laos surged, and Chinese residential communities also increased significantly. The representative tourist destinations Luang Prabang and Vientiane are overwhelmed by Chinese tourists. International affairs experts warn that “the economy of Laos, with a population of only 7.4 million, will rapidly be absorbed into China.”

From the perspective of Laos, the most underdeveloped country in ASEAN, the high-speed railway is seen as a good opportunity to overcome the limitations of being a landlocked country. As the first country in continental ASEAN to introduce high-speed rail, there is rosy optimism that it can dramatically develop the underdeveloped northern mountainous areas and the Mekong River basin based on this.

However, the approximately 2 trillion won debt to China incurred from the high-speed railway construction is a challenge to be resolved. As the strong natural barrier that once blocked China’s economic and political influence expansion is dismantled, the economies of Laos and ASEAN face the risk of becoming increasingly dependent on their large northern neighbor.

Jeong Ho-jae, Researcher at Korea University ASEAN Center

This content was produced with the assistance of AI translation services.