China’s high speed railway to Southern Asia

16 Feb

China high speed rail

Later this year, after years of planning, China’s high speed railway to Southern Asia will begin construction. The railway will pass through Laos and into Thailand and ultimately through Malaysia and into Singapore, further increasing China’s trade links within the region (Eimer, 2014). The railway is set to transform the landlocked country of Laos which lacks proper infrastructure and transport networks. It seems that this poor rural country will gain significantly from China’s desire to expand its trade, however the railway comes at a great cost to the small country. Between 50,000 and 200,000 Chinese workers will work on the construction over 5 years (T.J 2013: Eimer, 2014). In order to pay for this the government of Laos has accepted a loan from China of $6.2 billion plus interest, a sum almost equal to the country’s GDP (T.J, 2013). This loan is regarded as unaffordable and a disaster waiting to happen as Laos will become the fourth most indebted nation in the world (Eimer, 2014). The untapped natural minerals in Laos were used as collateral in the loan (Eimer, 2014). China requires resources such as those found in Laos to fuel its economy and therefore this move seems to benefit China in more ways than meets the eye.

Firstly the new trade route will allow increasing exports from China to its southern neighbours but also allows faster and cheaper importation of raw materials (T.J, 2013).

In addition to this the loan given to Laos to cover its section of the railway is miniscule compared to China’s GDP but the debt is likely to cripple Laos economically as the annual interest itself amounts to 20% of the Laos government’s annual spending (Eimer, 2014). With Chinese workers drafted in to carry out the construction the railway will yield no benefit to Laos until its completion in 2019 and in that time thousands of people in Northern Laos will be forced to relocate. In order to pay off the loan Laos will inevitably have to sell of mining rights to China and will have little negotiating power in this matter (T.J, 2013). Lastly corruption is ripe in this industry with the former Chinese rail minister, Liu Zhijun, who set the plan in motion, given a suspended death sentence for corruption in 2013 (BBC, 2013). China is set to gain significantly from this move whilst Laos is likely to suffer unless it can make the most of the new trade the railway may bring. With political corruption strong though it may be difficult for progress to be made, especially with the crippling debt hanging over the country.

BBC (2013), China ex-rail minister given suspended death sentence, [online] Available from: http://www.bbc.co.uk/news/world-asia-china-23222240 [Accessed: 16/02/2014]

Eimer, D. (2014), China’s 120mph railway arriving in Laos, Telegraph [online} Available from: http://www.telegraph.co.uk/news/worldnews/asia/laos/10572583/Chinas-120mph-railway-arriving-in-Laos.html [Accessed: 16/02/2014]

T.J. (2013), One night to Bangkok, The Economist [online] Available from: http://www.economist.com/blogs/banyan/2013/09/infrastructure-laos [Accessed: 16/02/2014]

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