$5.9B Laos-China Railway Opens As Critics Warn Of Debt Woes

Laos, a nation of 7 million people wedged between China, Vietnam, and Thailand, is opening a $5.9 billion Chinese-built railway that links China’s poor southwest to foreign markets but piles on potentially risky debt, Joe McDonald, Sam McNeil, and Elaine Kurtenbach reported for the Associated Press (AP).

Photo Insert: An aerial view of Laos-China Railway's T-beam installation in Laos during its construction phase

The line through lush tropical mountains from the Laotian capital, Vientiane, to Kunming is one of hundreds of projects under Beijing’s Belt and Road Initiative to expand trade by building ports, railways, and other facilities across Asia, Africa, and the Pacific.

The 1,035-kilometer (642-mile) line opens this week to cargo but no regular passengers due to anti-pandemic travel curbs. The Kunming-Vientiane railway’s 418-kilometer (260-mile) segment in Laos will be operated by the Laos-China Railway Co., a joint venture between China Railway group and two other Chinese government-owned companies with a 70% stake and a Laotian state company with 30%. Borrowed money makes up 60% of the railway’s investment, according to the two governments.

Poor countries welcome China’s initiative. But the projects are financed by loans from Chinese state-owned banks that must be repaid. Some borrowers complain Chinese-built projects are too expensive and leave too much debt.

The Kunming-Vientiane railway is a link in a possible future network to connect China with Thailand, Vietnam, Myanmar, Malaysia, and Singapore. That would give southern China more access to ports and export markets.

Laotian leaders hope the railway will energize their isolated economy by linking it to China and markets as far away as Europe. But foreign experts say the potential benefits to Laos beyond serving as a channel for Chinese trade are unclear and the cost appears dangerously high.

The railway will “generate very positive economic returns” for China and possibly other countries, but it is harder to see “exactly what the economic benefits are going to be” for Laos, said Scott Morris of the Center for Global Development in Washington.

With only 21 stations in Laos, the line is designed to serve Chinese needs to reach foreign ports quickly, Morris said. He said a railway to serve mostly rural Laos would have more stations to connect farmers to markets.

“This is essentially a Chinese public infrastructure project that happens to exist in another country,” he said.

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