The evolving relationship between the USA and China is already having a transformative effect on global and regional supply chains. Whilst there has been a focus on the new tariffs which President Trump may impose on Chinese imports, the reality is that the Chinese government has been re-focusing its trade strategy for over a decade. This was initiated by the economic impact of the Great Recession in 2008 which left a large hole in Chinese exports combined with the political goal of extending Chinese influence through the emerging world by way of the Belt & Road Initiative.
Whilst the projection of China’s Soft Power through the financing of port and energy projects has been well documented, far less has been written about the development of a rail network throughout South East Asia. The eventual goal of the governments involved – driven mainly by China – is to link Beijing to Singapore, reducing passenger travel times to 30 hours initially and to 18 hours by 2040. Whilst the priority of the rail network will be to expedite the movement of passengers across the region, including Chinese ex-pats and tourists, it will also create huge capacity for freight. The first part of the, the Laos-China Railway opened in 2021, and by 2023 was, according to CNN, transporting 4.22 million tons of freight, an increase of almost 100% on the year before.
The next stage could see Thailand connected in 2028 and following that an expansion into northern Malaysia and from there to Singapore. The network, also know as the Pan-Asia Railway, comprises three routes in total linking China’s Kunming to Singapore via Myanmar, Thailand, Laos, Vietnam, Cambodia and Malaysia.
- Central Route: Kunming (China) – Yuxi (China) – Vientiane (Laos) – Bangkok (Thailand) – Kuala Lumpur (Malaysia) – Singapore
- Western Route: Kunming – Dali (China) – Yangon (Myanmar) – Bangkok, Kuala Lumpur and Singapore
- Eastern Route: Kunming – Yuxi – Hanoi (Vietnam) – Ho Chin Minh (Vietnam) – Phnom Penh (Cambodia) to Bangkok, Kuala Lumpur and Singapore.
A further service has been recently launched on existing rail track, the ASEAN cargo express. This involves a 14 day trip from Kuala Lumpur to Chongqing operated by Malaysia’s railway company, KTMB, transiting Thailand and Laos. According to one estimate the service will be 30% cheaper than air cargo equivalent.
Of course, the investment comes at a cost – both financial and political. Laos – one of the poorest countries in the world – is not in a position to spend the multi-billion price tag required by the project. It consequently has had to rely on loans from the Chinese government, and in return allow China access to mineral ores, rare earth metals, timber and rubber. Laos is now one of the most indebted countries in the world.
Whilst the benefits of economic integration across the region are evident, especially as Chinese manufacturers will be looking to supply the US market through new distribution channels in the wake of higher tariffs, many south east Asian governments will be wary of Chinese influence. Several ASEAN members are in dispute with China over territorial claims and political relationships will not be straightforward, with or without ‘debt diplomacy’. This has led to delays in parts of the project with Malaysia, for example, more hesitant on moving ahead. In addition to this, parts of the region are affected by political instability. Myanmar, on the western route, has for years been beset by a civil war in which the disruption of the country’s railways is a key strategic objective for rebels.
Whilst the economic benefits of an integrated rail network linking China with south east Asia are clear, political and security issues will make its development less than straightforward. Somewhat ironically, President Trump’s tariff policy may provide additional momentum to the project as a result of Chinese manufacturers off-shoring production to neighbouring countries. This dynamic would consolidate China’s influence in the region which, whilst bringing jobs and investment, would run counter to the USA’s strategic aims.
Source: Ti Insight
Author: John Manners-Bell
