Analysis: Twists and Turns Abound for Chinese-Built Railways in Southeast Asia

By Wang Xintong and Zou Xiaotong

China is working with Thailand and Vietnam to build two major railways connecting the countries, as part of an ambitious megaproject to strengthen trade and economic ties across Asia.

On Wednesday, Vietnam’s parliament approved a railway project linking northern Vietnam and the Chinese border province of Yunnan, the Vietnam News Agency reported.

Work is set to start on the $8 billion railway at the end of this year, according to local media reports. The new deadline, which was requested by Prime Minister Phạm Minh Chính, is significantly earlier than the originally planned 2027 target outlined in a report submitted to Thailand’s Ministry of Transport.

Meanwhile, Beijing and Bangkok have agreed to “expedite” the first phase of construction of a 609-kilometer (378.4 mile) railway that will connect the two countries via Laos, and to launch the second phase as soon as possible, according to a joint statement published on Feb. 8.

Both nations recognize that “enhanced connectivity would serve as a catalyst for economic integration and shared growth across the region,” the statement said. Days earlier, Thailand’s cabinet approved the project’s 357.12-kilometer second phase, with construction slated to begin this year.

The two railways are part of the Trans-Asian Railway (TAR) Network, a United Nations project aimed at creating an integrated railway network connecting Asia and Europe. In 2009, an intergovernmental agreement on the network came into force, outlining the development of four main routes to link dozens of countries across the two continents.

But, due to funding constraints and other issues, the project’s Southeast Asian portion basically stalled until 2016, when construction began on a 1,035-kilometer railway linking China and Laos. Beijing covered 70% of the construction costs, which totaled nearly $6 billion.

Industry insiders argue the TAR initiative will significantly enhance Southeast Asia’s transport capacity and efficiency, boost industries along the routes, foster multilateral trade, facilitate economic and personnel exchanges, and reshape the development of the ASEAN region. It can also help participating countries mitigate geopolitical risks in an increasingly complex global trade environment.

However, there has been debate about whether those economic opportunities outweigh the social and environmental impacts. The project has reportedly polluted drinking water sources, damaged farmland, and harmed local biodiversity in some areas. Moreover, concerns have been raised about the influx of Chinese workers and the flooding of local markets with cheaper Chinese goods.

With its well-established rail network, China plays an important role in the TAR project, participating in the planning and construction of multiple routes and providing financial and technical support. The country is willing to work with ASEAN nations to “actively promote” infrastructure cooperation in railways, Premier Li Qiang said at a high-level meeting in Laos’ capital Vientiane in October.

Long-delayed China-Thailand project

The construction of the China-Thailand railway has been marked by numerous challenges and delays.

The railway, divided into two phases, will first link Bangkok with the northeastern province of Nakhon Ratchasima. It will then extend to Nong Khai, a city bordering Laos, where it will connect with the existing China-Laos railway. The railway is expected to cost around 521 billion baht ($15.5 billion).

The project was first proposed in 2006 but was shelved temporarily due to political instability in Thailand. In 2014, China and Thailand restarted the project, but disagreements over cost estimates, financing plans and development rights caused further delays.

After more than 20 rounds of negotiations, ground was broken on the 252-kilometer first phase in 2017.

In 2022, Thailand said it wanted to complete the first phase by 2026, foreign media reported. However, the deadline was pushed back by at least two years, reportedly after the country’s state-owned rail operator decided to change the design of one section following complaints from Nakhon Ratchasima residents.

It remains unclear whether the project will meet its deadline. Citing Thailand’s Deputy Transport Minister Surapong Piyachote, the Bangkok Post reported in September that the signing of one of the last two first phase construction contracts had been delayed due to concerns that the planned location of the Ayutthaya station was too close to the Ayutthaya Historical Park, a UNESCO World Heritage site.

The Thai authorities have submitted a Heritage Impact Assessment to UNESCO for a review. However, Piyachote stated that regardless of UNESCO’s final decision, the rail project will proceed without alterations, citing the high cost of further delays, according to the Bangkok Post report.

Thailand is fully funding the China-Thailand railway project, while adopting Chinese technology. As of Dec. 25, the first phase was nearly 40% completed, according to the project’s official website.

Faster progress for China-Vietnam link

The rail line connecting China and Vietnam is expected to progress faster than its Thai counterpart.

In November, Prime Minister Chính met with the chairman of China Railway Construction Corp. Ltd. (CRCC), the project’s primary contractor. This meeting “underscored Vietnam’s strong commitment to the project,” a senior overseas railway investor said.

Unlike some other projects where Chinese companies may need to provide funding, the investor said CRCC’s role is primarily limited to engineering and construction, making the project’s execution more straightforward.

The railway will stretch 391 kilometers, connecting the port city of Haiphong to Lao Cai, a mountainous city bordering Yunnan, while passing through the Vietnamese capital Hanoi.

The project is expected to cost 203 trillion Vietnamese dong ($7.9 billion), local media reported. Funding for the project will come from government budgets, local investors, foreign loans such as from the Chinese government and other financial sources.

Announcing the project’s construction schedule in December, Chinh emphasized the need for compatible rail gauges and speeds to ensure seamless integration with China’s standard-gauge system. Currently, Vietnam’s railways use meter-gauge tracks, built during French colonial rule. Adopting standard gauge would significantly boost passenger and freight transport between the two countries.

Sino-Vietnamese rail cooperation has gained momentum in recent years. In December 2023, the two countries agreed to study or promote the construction of three standard-gauge railways, including the Lao Cai-Hanoi-Hai Phong line, at “appropriate times.” Additionally, Vietnam’s first urban light rail in Hanoi, built by China Railway Group Ltd., began operations in November 2021.

Zhao Weihua, a professor at the Institute of International Studies of Fudan University, suggested that Vietnam’s accelerated push for rail development may be influenced by the success of the China-Laos railway.

In December 2021, the 1,035-kilometer railway that runs from Kunming, Yunnan province, to Vientiane, opened for service, cutting travel time between the two cities to about 10 hours.

Since its launch, the China-Laos railway has delivered significant economic benefits. In 2023, it was integrated into the China-Europe railway network, significantly reducing transport times for goods traveling from Laos to Europe. In 2024, the railway carried 19.11 million passengers and transported 19.64 million tons of cargo, representing year-on-year increases of 15.2% and 10.6%, respectively, according to data from China State Railway Group Co. Ltd.

The railway has also reduced transport costs for goods moving from Kunming to Thailand through Laos by 30% to 50%, while transport costs within Laos have dropped by 20% to 40%, according to the Chinese state-owned rail operator.

Contact reporter Wang Xintong (xintongwang@caixin.com) and editor Joshua Dummer (joshuadummer@caixin.com)

caixinglobal.com is the English-language online news portal of Chinese financial and business news media group Caixin. Global Neighbours is authorized to reprint this article.

Image: Sean Hsu – stock.adobe.com