ASEAN Succumbs to China Rail Diplomacy

As China turned over the last two decades into Asia’s economic powerhouse, the influence of the country over Southeast Asian policies has been growing in parallel to its own expansion. China’s influence reaches today any economic sector of ASEAN, from financial support to tourism, from industry development to trade. One of China’s most visible presences these days is in infrastructure development. With a maturing economy, China needs now to export its technology and knowledge to new horizons.

The ASEAN with its developing economies such as Cambodia, Lao PDR, Indonesia, Myanmar or Thailand are favourable playgrounds to China expansion. One of the most dynamic diplomacy strategy of China today is in the rail business.

China’s rail development has been tremendous over the last decade, as the country embraced high speed rail. The result is staggering: China PRC has today 18,000 km of high speed train criss­-crossing virtually any corner of the country. Just in 2015, China opened another 2,350 km of new high speed rail lines while it is due to open 442 km this year and another 1,175 km of new lines in 2017.

The government is considering high speed rail technology a priority to the country’s development. However, as China ‘s rail network is coming also to maturity, Chinese leaders turn their eyes to Southeast Asia where demand to modernize intra-ASEAN infrastructure is enormous. While countries such as Indonesia, Malaysia, Lao PDR, Myanmar, Vietnam and Thailand have been looking at modernizing their rail networks for decades –with few achievements so far-, China’s commitment to export its high speed rail technology gives suddently a new impetus to train development in the region, especially as its most fervent spokesmen to Chinese rail technology are indeed China’s President Xi Jinping and his Premier Li Keqiang.

In the last two years, China has been able to successfully sign MoU or agreements with Cambodia, Laos, Indonesia and Thailand for the development of high speed or semi-high speed train lines. The most strategic one is the rail corridor which is due to link Kunming in Yunnan to Singapore via Laos, Thailand and Malaysia. Laos and Thailand are so far the largest projects to date. Laotian and Chinese authorities signed an agreement to finance most of the construction of a 417 km high speed rail which will link China border in Luang Namtha to Vientiane and Nong Khai, the border to Thailand, The line would pass through Luang Prabang and Vang Vieng, two important destinations for tourism. The groundbreaking ceremony for the new line –an investment estimated at US$6.8 billion- took place last December.

Meanwhile, the government of General Prayuth Chan-ocha approved a MoU with China for the construction of a semi-high speed rail line of 875 km linking Nong Khai to Map Ta Phut in Rayong province, providing a direct rail link to the sea port along the Gulf of Siam. A branch would also go up to Bangkok. The project is estimated to cost US$11 billion and is part of almost 4,000 km of rail connecting Yunnan to Singapore.

China is also looking at connecting by rail the Myanmar border to Dali in Yunnan. However, a further continuation into Myanmar has been cancelled by the previous military government two years ago under popular pressure. It might be possible that the new civilian government might look again at the original project of connecting Yunnan to the Bay of Bengal.

Most surprising however is also the recently awarded contract to China by Indonesia to develop the country’s first high speed rail between Jakarta and Bandung in West Java. China won over Japan in that case for the 140 km long rail route. The project is estimated to request a total investment of US$5.5 billion with a possible completion around 2020. The ground breaking ceremony for the future high speed rail line took place at the end of January.

China is now bidding to get the project of a 330 km high speed train link between Kuala Lumpur and Singapore. The project is estimated to request a total investment of US$15 billion. China already announced to be ready to commit US$10 billion into the project. A decision will be taken by both Malaysian and Singaporean governments this autumn. But according to reports from Malaysian newspapers last week, China is in a favourable position to win the bid. In Cambodia, China Railway International Group has explored feasibility to invest in building railroads with a north-south project.

Why is China so successful? Beyond possible pressure from the Chinese government on trade or tourism relations, China has shown high flexibility to finance those rail infrastructures, providing full loans without asking guarantees from the involved national governments. Its technology is also generally cheaper and also faster to be delivered than competition –mostly Japan or South Korea. According to a report of the World Bank dating back to 2014, rail construction by Chinese companies are on average a third cheaper than competition.

With China into the fast development of rail in Southeast Asia, the dream of finally connecting Singapore to Yunnan is taking shape and will give ASEAN the much desired high speed rail network it has dreamed for. It will also help to the economic integration of the region – not talking about the ease of movements for travellers keen to go from one country to another. And it will also help China expanding its economic influence and possibly its political dominance over its Southern neighbours.