Other BriefingsStrengthening China-Laos Relations: Strategic Cooperation and Development Initiatives
China and Laos are deepening their strategic partnership, advancing key projects like the China-Laos Economic Corridor and Railway, and enhancing cooperation in emerging sectors for regional connectivity and growth.
On March 13, 2025, Member of the Political Bureau of the CPC Central Committee and Foreign Minister Wang Yi met with Lao Foreign Minister Thongsavanh Phomvihane in Beijing, reaffirming the long-standing and strategic nature of China–Laos relations. Over the past 64 years since the establishment of diplomatic ties, the two countries have consistently supported one another, with their comprehensive strategic cooperative partnership deepening across both political and economic dimensions. Wang Yi reiterated China’s strong backing for Laos’ development goals, including its reform and opening-up agenda, socialist modernization, and efforts to enhance its international profile.
China–Laos cooperation continues to deepen across a wide range of strategic and economic areas. Both sides have committed to strengthening exchanges at all levels and advancing key projects such as the China-Laos Economic Corridor and the China-Laos Railway. These initiatives are central to their shared vision of regional connectivity and inclusive growth. Cooperation is also expanding into emerging sectors including energy, artificial intelligence, and the digital economy, reflecting a forward-looking partnership that adapts to evolving global trends. In addition, both countries have pledged to enhance law enforcement collaboration to combat cross-border crime and safeguard stability in the region.
Following the successful conclusion of China’s “Two Sessions,” which set an economic growth target of around 5 percent for 2025, Wang encouraged Laos to seize the development opportunities presented by China’s modernization and deepen cooperation on the path toward common prosperity. Laos, for its part, reaffirmed its strong support for China’s Belt and Road Initiative and the three global initiatives put forth by President Xi Jinping. As close neighbors, Laos and China are committed to further aligning development strategies and promoting regional interconnectedness.
The China-Laos Economic Corridor
At the heart of the China-Laos Economic Corridor lies the China-Laos Railway, a flagship US$6 billion project under the BRI, symbolizing the transition of Laos from a landlocked to a land-linked country. The 1,035-kilometer railway connects Kunming in China’s Yunnan province to the Lao capital Vientiane and serves as a physical and strategic backbone for economic development across the region. Since its launch in December 2021, the railway has not only redefined regional logistics but also become a vital artery of the emerging China-Laos Economic Corridor.
As of September 2024, the railway had transported over 10 million metric tons of goods, with the variety of goods expanding from 500 at launch to over 3,000 today. Beyond reducing transportation costs and improving efficiency, it has enabled Lao businesses—though still limited in scale—to access international markets more easily. In parallel, passenger services launched in April 2023 have supported over 3 million trips in 2024 alone, facilitating tourism, educational exchange, and labor mobility, with travelers coming from more than 100 countries.
However, while the railway has significantly boosted imports and connectivity, the economic corridor is still largely unidirectional in its trade flows—dominated by Chinese goods entering Laos. Lao exports remain limited due to production constraints and an underdeveloped logistics ecosystem. Although the railway theoretically opens access to Thailand and the broader ASEAN market, Lao firms often lack the capacity to transition from truck-based to rail-based distribution, revealing gaps in industrial development and supply chain integration.
The China-Laos Railway is jointly operated by the Laos-China Railway Company, a joint venture in which Laos holds a 30 percent stake through the Lao National Railway State Enterprise. The US$6 billion project is funded through a mix of loans and equity, with China’s Eximbank financing 60 percent. While it promises long-term economic returns, concerns persist over Laos’ mounting debt to China—now accounting for over half of its external debt and estimated to surpass 100 percent of GDP.
The China-Laos Economic Corridor also extends beyond rail. Energy infrastructure has become a key pillar, with Chinese state-owned firms gaining long-term control over Laos’ national grid and hydropower assets. Notably, the Électricité du Laos Transmission Company Ltd. (EDLT), a joint venture with China Southern Power Grid, now oversees high-voltage transmission for 25 years, controlling cross-border electricity flows. Projects like the Nam Ou River Cascade, developed entirely by Chinese firms, reflect the depth of Chinese involvement in Laos’ critical sectors, reinforcing China’s role not only as a trade partner but also as a key stakeholder in the country’s infrastructure and energy future.
Hence, while the China-Laos Economic Corridor enhances Laos’ connectivity and regional profile, it also deepens the country’s dependence on China. The corridor presents opportunities for growth and regional integration, yet without substantial upgrades in Lao industrial capacity, governance, and debt sustainability, the long-term benefits may remain unequally distributed.
China-Laos bilateral trade
In 2023, bilateral trade between China and Laos reached approximately US$7.1 billion, marking a 26.6 percent year-on-year increase. The value of trade between the two nations rose by 27 percent from US$5.7 billion in 2022 to just over US$7 billion in 2023. China exported US$2.9 billion worth of goods to Laos, primarily consisting of machinery with individual functions (US$150 million), delivery trucks (US$132 million), and insulated wire (US$92.9 million). Over the past five years, China’s exports to Laos have grown at an annualized rate of 12.9 percent.
Conversely, Laos exported US$3.41 billion to China in 2023, led by potassic fertilizers (US$630 million), other uncoated paper (US$453 million), and copper ore (US$408 million), reflecting a 14.9 percent annualized growth. Monthly data also shows continued momentum, with Laos’ total exports to China reaching US$255.1 million in October 2024, up from US$243.5 million of September 2024.
The launch of the China-Laos Railway in December 2021 has significantly reduced freight transportation time and logistics costs, deepening economic and trade cooperation. As of November 2023, Kunming Customs had handled over 10.6 million tonnes of goods—valued at over RMB 44 billion (US$6.11 billion). The number of product types traded across the border expanded underscoring the growing diversification of bilateral commerce.
One recent example includes the arrival of 20 tonnes of Laotian durians at China’s Mohan Station via the Lancang-Mekong Express service. The shipment received customs clearance in just five minutes, highlighting the railway’s efficiency. The improvement follows the April 2022 decision for Kunming to assume full administrative responsibility over Mohan Town in Yunnan’s Xishuangbanna Dai Autonomous Prefecture, which enabled faster customs procedures and infrastructure upgrades.
Mohan has since become a highland for opening up, attracting increasing investments from Chinese companies. China Railway Yunnan Construction Investment Co., Ltd., for instance, has expanded its presence in the area and is actively contributing to key infrastructure projects, including a digital economy industrial park and an industrial management center. These efforts have further positioned Mohan as a strategic logistics and economic gateway between the two countries.
In parallel, China has undertaken several cooperative projects in Laos. These include the construction of a railway operations training college and the provision of facilities to support Laos in hosting ASEAN meetings. Such initiatives reflect a broader strategic partnership, blending infrastructure development with capacity building.
Agriculture is another area of deepening engagement. China has become the main export destination for agricultural produce from Laos’ Xayaburi Province, where cassava, sweetcorn, pears, tea, beans, vegetables, and watermelon are the main exports. These flows have improved the local agricultural environment and created employment opportunities in rural areas.
By early 2024, Chinese companies had already invested around US$986 million in Laos, solidifying China’s role as the country’s largest trading partner for 2025. These investments are expected to further stimulate bilateral trade and economic integration across multiple sectors, from agriculture to logistics and education.
China-Laos investment
In 2023, China invested in 17 projects in Laos, with a total value of US$986 million, nearly tripling the investment of US$339 million in 2022, which covered 30 projects. This growth reflects China’s increasing prominence as a key investor in Laos, positioning it to soon overtake Thailand as the top trading partner of the landlocked country. The Lao Ministry of Planning and Investment revealed this data at a meeting of the Laos-China Cooperation Committee in Vientiane on February 21-22, 2023, where the progress of trade and FDI was reviewed. However, despite the influx of Chinese investment, many ordinary Laotians feel they have not yet fully experienced the benefits of these developments.
Chinese investments have played a significant role in Laos’ economic growth, contributing to the country’s socioeconomic development goals and job creation. According to the Lao Ministry of Planning and Investment, China has been Laos’ largest source of foreign investment over the past decade. Since 1989, China has invested a total of US$13 billion in 933 projects. This includes diverse sectors, such as mining (particularly copper and gold), energy, and infrastructure development. The sectors that attract the most Chinese investment are mining (37 percent), industrial construction (12 percent), and hydropower projects (12 percent). The above key industries, together, account for over 60 percent of total Chinese investments in the country.
Laos’ agricultural sector has significant growth potential, with the government prioritizing the expansion of domestic processing to add more value locally. The country’s vast unutilized land and the growing markets for agricultural products in neighboring countries provide ample investment opportunities, particularly in livestock farming, dairy production, and agribusiness. Opportunities also exist for the export of modern agricultural technologies, such as harvesting, planting, and processing machinery.
Additionally, the consumer and services sectors are poised for expansion, driven by increasing disposable income, especially among elites and the growing middle class. Examples of this trend include the rise of private hospitals (often Thai-invested) in Vientiane, increased sales of automobiles (especially electric vehicles), new hotel openings ahead of Laos’ ASEAN chairmanship in 2024, and more young Laotians seeking higher education abroad.
Chinese investment is also contributing to Laos’ infrastructure development. Notable projects include the construction of highways linking Vientiane with Boten on the Laos-China border and improvements to roads forming the East-West Economic Corridor in Savannakhet province. There are also discussions about future infrastructure projects, including a Lao-Vietnam railway that would connect Laos to the Vung Ang port in Vietnam and rail links connecting southern Laos to Thailand and Cambodia.
The development of dry ports along Laos’ borders with Thailand and Vietnam, as well as potential railway links to neighboring countries, further enhances Laos’ connectivity within the Greater Mekong Subregion and is expected to bolster trade flows.
The Lao government is optimistic about the future of Chinese investment, particularly in the context of the 9th Five-Year National Socio-Economic Development Plan (2021-2025). The government is focused on moving Laos from its current status as a least-developed country to a developing country. As part of this plan, Laos is looking to emulate China’s economic development model and attract more investments into Special Economic Zones (SEZs) located in regions like Vientiane, Savannakhet, and Champasak. These SEZs offer various incentives, including tax holidays, to international investors, particularly in sectors such as manufacturing and agriculture.
Despite the influx of investment, some challenges remain for Chinese enterprises operating in Laos. There is a need to adapt to local market conditions by tailoring products and services to meet consumer needs. Additionally, Chinese companies are encouraged to cooperate with local retailers and distributors to expand their market reach.
The “localization” strategy has become increasingly important for Chinese enterprises in Laos. To succeed, businesses must understand and align with local government policies, offer products that meet local demand, and integrate more Lao workers into their operations. Through such efforts, Chinese businesses can gain recognition and thrive in the Laotian market.
Key takeaways
In conclusion, the growing partnership between China and Laos, particularly in the realm of investment and infrastructure development, is poised to continue its upward trajectory. Both countries have reviewed their existing cooperation and discussed future plans to strengthen their relationship further. The implementation of the “Master Plan on the Creation of Laos-China, China-Laos Partnership” for the period 2024-2028 is central to these efforts. This plan aims to enhance bilateral ties, with a specific focus on economic diplomacy, macroeconomic stability, and promoting trade and tourism between the two nations.
By establishing a dialogue mechanism for economic diplomatic cooperation, both sides aim to address key challenges, foster sustainable growth, and create new opportunities for investment. Their discussions also encompassed broader regional and international matters of mutual interest, reinforcing the importance of collaboration in the context of ASEAN and beyond. As both nations continue to build on this solid foundation, the future of Laos-China relations appears bright, with further opportunities for economic, cultural, and diplomatic engagement on the horizon.
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