China Invests in Asian Infrastructure

November 22, 2010 Posted by China Briefing Reading Time: 2 minutes

Nov. 22 – China, facing the positive problem of being a capital surplus economy, is diverting more funds to assist with the development of Asian infrastructure, and is in high level talks with several countries to provide funds and loans for high-speed rail and related projects across the region.

China and Thailand are set to agree on a plan to build high-speed rail lines that will pass from Southern China through Laos to Thailand, and then to the border of Malaysia. The Thai Parliament approved the deal last month in a project likely to cost some US$27 billion. The trains on this line would be expected to run at about 250 kilometers per hour. According to Thai Transport Minister Sophron Sarum, the first section will be built in Northern Thailand on the Thai-Laos border and will link Bangkok with Nong Khai. Construction has just commenced.

The Chinese link through to Malaysia would be expected to link up with the Malaysian-funded high-speed rail between Kuala Lumpur and Singapore; however this has still to be formally approved. China is still held at arm’s length by Vietnam and the China-Thai link bypasses Vietnam all together. Vietnam is planning its own, 1,570 kilometer high-speed rail between Hanoi and Ho Chi Minh, as we reported here. That line is being built with Japanese technology and funding.

China and Vietnam have a history of border skirmishes despite both being communist states and recent tensions over disputed islands in the South China Sea have not helped alleviate long standing problems between the two. Vietnam’s politicians are divided between factions that want nothing to do with China, and those who want China’s investment, tourism and trade. China has offered to develop a high-speed rail link between Ho Chi Minh and Phnom Penh, the capital of neighboring Cambodia some 257 kilometers away. That would make the journey between Ho Chi Minh and Phnom Penh achievable in less than 90 minutes. It currently takes six hours by road and although there are direct flights, the security issues and airport travel makes the journey about a four hour excursion.

Cambodia agreed to a US$1.6 billion infrastructure development deal with China earlier this month, set to assist with the development of roads, bridges, dams and railway links. China has some way to go to make inroads into Cambodia, which is more politically aligned with the United States, although that may change. Western aid usually comes with strings attached in the form of human rights and political reform, something that China tends not to push as a condition.

China has also been making inroads with Indonesia, ASEAN’s largest member nation, and has signed deals worth US$6.6 billion with Jakarta for projects in infrastructure, energy and agriculture. That Indonesia lies just off the coast of Singapore makes the future prospect of linking Jakarta to Singapore via rail, and then into the pan-Asian high-speed rail system to China, something that could worked on.