Laos’ financial debt to China grows as $6 billion high-speed rail line between the countries is unveiled

China is now connected with Laos via a recently completed high-speed rail line which reportedly cost $6 billion. 

China is now connected with Laos via a recently completed high-speed rail line, which reportedly cost $6 billion. 

Chinese-led initiative: On Friday, a virtual ceremony attended by Chinese President Xi Jinping and Laotian President Thongloun Sisoulith marked the opening of the rail line, which is part of China’s global infrastructure development strategy called the “Belt and Road Initiative,” reported Reuters

  • China has a 70% stake in the joint venture, which the Chinese and Laotian governments co-signed back in 2015.
  • The 621.37-mile line connects the two countries from the city of Kunming in southwestern China to Vientiane, Laos’ capital.
  • Laos is covering 30% of the cost of the 260-mile segment inside the country in the form of additional loans to China, according to South China Morning Post.
  • Around 4,400 Laotian families were reportedly forced to relocate to accommodate the railway’s construction.
  • The line is set to expand further, eventually connecting several countries, including Thailand, Malaysia and Singapore.
  • “China is willing to strengthen strategic communication with Laos, promote the high-quality development of the Belt and Road Initiative, and continue to build an unbreakable China-Laos community with a shared future,” Xi was quoted by state-run CCTV as saying.
  • Laos state news agency KPL described the project as an integral part of its government’s plan to change Laos from “a landlocked country to a land-linked one.”

Trail of debt: While the project can be considered a significant modernization effort in one of the least developed countries in Asia, observers have expressed concern about its economic and political impact on a nation that owes much of its external debt to China, reported South China Morning Post.

  • In 2020, Laos’ debt levels were expected to grow to between 65 and 68% of its gross domestic product (GDP), according to the World Bank.
  • The Center for Global Development’s Scott Morris called the project “essentially a Chinese public infrastructure project that happens to exist in another country.”
  • Morris told Stuff that the railway will “generate very positive economic returns” for China and other countries, but it is difficult to determine “exactly what the economic benefits are going to be” for Laos.
  • Grant Raymond, an Australian National University lecturer in Asia-Pacific affairs, argued that Laos is now at risk of an economic burden if it fails to take significant advantage of the project.  
  • “Laos has put itself in a position where if the railway doesn’t make a profit, then it’s got real debt issues,” Raymond said. 

On Saturday, the railway will start transporting passengers who are fully vaccinated against COVID-19.

Featured Image via CGTN Global Watch

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