The Research of the Influence on the China-Laos Railway’s Opening: Bridge Hunan China and ASEAN

Authors: Liang Wu, Xiao Luo & Jun Chen

ISBN: ‎ 978-6138973300

Publisher: Scholar’s Press.

Year: 2022.

Reviewed by Andrew Bellamy, PhD candidate, Rutgers University, New Jersey, USA

The China-Laos railway, which opened on December 3, 2021, inaugurated a new era in China-Laos and China-ASEAN relations. Part of China’s Belt and Road initiative, the 1,035-kilometer railroad benefitted – and continues to benefit – from Chinese investment and from Chinese construction and safety standards. The trains that traverse its tracks at speeds of up to 160 kilometers per hour connect Laos’s capital, Vientiane, to Kunming, the provincial capital and largest city in China’s Yunnan province, thereby connecting Vientiane to China’s globally unparalleled high-speed rail network. In tandem with the Regional Comprehensive Economic Partnership (RCEP), which took effect on January 1, 2022, the railway appears poised to offer new and attractive economic opportunities for Laos and China and for the RCEP’s other signatories.

This, in short, is what the authors of this brief but highly informative study argue. Drs. Jun Chen, Liang Wu, Xoap Luo and their research team at the SILC Business School at Shanghai use qualitative and quantitative research to examine the railway’s influence on Chinese and Lao trade and on China-ASEAN trade more broadly. They argue that the railway strengthens Chinese-Lao ties, injects “new momentum” into Southeast Asia’s economic development, and opens fresh opportunities for regional cooperation (3).

They make the compelling case that this is so first because the railway facilitates and accelerates mutually beneficial trade between China and Laos. The bulk of China’s total exports to Laos consists of industrially manufactured goods. Just household appliances, machinery and technology, and transportation equipment constitute over half of these total exports (15). Conversely, agricultural products, electricity, and minerals are – and have long been – Laos’s principal exports to China (20). This trade relationship offers clear benefits to China as the world’s largest consumer of agricultural products and to Laos, which needs manufactured goods to continue growing its still-small economy. In the short term, the new railway will increase both the speed and the volume of this trade. In the long term, the railway will ensure a sustainable, reliable, and large bilateral trade between the two nations.

Inextricably tied to these considerations is the fact that Laos possesses poor transportation infrastructure. Given agriculture’s outsized importance to the Lao economy, this lack of developed transportation infrastructure is most clearly felt in the realm of shipping – much more so than in tourism or in other industries that similarly rely on such infrastructure. As the authors note, the average cost of transporting goods within, across, or out of Laos is double the average cost in other ASEAN nations (21). The railway helps remedy this problem by constructing a substantial and tangible improvement while reducing the costs of trading and transportation time. This will increase both the diversity and frequency of China-Laos trade and drive employment and investment along the route (51).

But the new railway will transform much more than just this bilateral trade. Rather, the authors envision that Vientiane will become a – or the – major hub for trade between ASEAN nations and China. Vientiane accordingly stands to benefit greatly from the favorable trading conditions that the railway and the RCEP enable. With its ASEAN signatories and four non-ASEAN parties – China, Japan, Australia, and New Zealand – the RCEP created the world’s largest free trade zone in terms of economic and trade scale and development potential. Ninety percent of imports within the region are now tariff-free. This massive tariff reduction comes after a decade of vibrant and increasing trade between China and the other RCEP countries in which trade with the ASEAN members, specifically, accounted for the highest proportion of this trade and consistently trended upward (7). The authors find that, against this backdrop, GDP and welfare levels in China and in ASEAN’s RCEP signatory nations will rise while leading to a “complementary and rational allocation of resources within the region” (11, 31-33). Paired with the RCEP, the railway will usher in “a process of continuous and stable development to rapid growth” and the “best phase of development in [the] history” of China’s trade with Laos and other ASEAN nations (12).

The railway consequently positions Vientiane as the most crucial center for the distribution of Lao and ASEAN products. Factories, warehouses, and industrial parks with direct access to the railway in Vientiane allow for largescale processing and storage, logistical planning and support, and trade. Like the railway itself, these structures are the products of Chinese investment and, taken together, act as both an export base for Lao agricultural products and an inland port for products from elsewhere in Southeast Asia. They will also serve as a test case for future, similar construction projects in Myanmar, Thailand, and other ASEAN nations. Through the railway, then, Laos has become central to China’s relations and cooperation with ASEAN. As the authors conclude, the task now at hand is to heighten awareness within China of the availability – and desirability – of the products that Laos and its fellow Southeast Asian nations have to offer within this favorable commercial context. If and when this happens, regional trade will continue to develop on a positive trend and to the benefit of consumers in both China and Southeast Asia (53).

Though quite short, this is an admirable study for many reasons, only a couple of which can be discussed here. Especially praiseworthy is the authors’ distillation of qualitative and quantitative data into digestible and usable sizes. Their analysis relies on a broad and eclectic source base, including business literature, designed experiments, empirical analysis of digitally accessible trade statistics, gravity and mixed regression models, industry data, interviews with business and marketing executives, and brief gestures toward historical examples. Casting such a wide net allows the authors to raise several questions for future research, something they explicitly embrace as a goal of their study (6). It also provides a template for future studies of similar infrastructural products that other scholars of business, development studies, or related fields might undertake. The authors’ uses of historical examples are equally noteworthy. Best seen in the overview they give of trade relations between China and Laos dating back, roughly, to the beginning of the Deng Xiaoping era. These examples provide context and grounding both to their crisp analysis of present conditions and the vision(s) they lay out for the future.

But these historical references also help illuminate some of the roads not taken in this study. As one example, the authors do not undertake an equally deep discussion of China’s historical or current relations with other ASEAN nations, with ASEAN itself, or with the other non-ASEAN signatories to the RCEP to complement their strong treatment of the China-Laos relationship. This is an especially puzzling absence given the authors’ admission that Laos itself accounts for a small portion of China’s ASEAN and RCEP trade. At times, some of the authors’ fieldwork and numerical data show similar imbalances. For example, many of their surveys and survey questions concern China and Southeast Asia, not China and Laos or China and ASEAN. While this is likely and ultimately a minor point, this framing seems to verge on conflating Laos – and specifically Vientiane – with Southeast Asia as a whole, and it is possible that additional questions might have added further geographic clarity and thus strengthened the quantitative part of the broader study. So, too, might have a closer attention to consistency in the languages used: while the text itself is in English, some of the charts and graphs are in Chinese, which would present some difficulty to those who cannot read Chinese. Another, somewhat related point is that the study might have benefitted from a short glossary to define terms like the “China-Laos community of destiny,” the Trans-Asian Railway, “direct products,” and “primary products” that are lesser known than, for example, the Belt and Road Initiative and with which some readers might not be well acquainted. A final point is that the authors’ almost exclusive interest in the railway’s use for transporting goods prevented any meaningful discussion of passenger traffic.

These quibbles notwithstanding, this is an engaging and informative study that makes for a brisk read. Scholars in Asian studies, business, development studies, economics, and history will find its methodology and findings thought-provoking and will undoubtedly identify several subjects for further inquiry.