China Economic Review

Will Doig on China’s ambitions to build a Pan-Asia Railway

China’s Belt and Road Initiative promises to become the largest infrastructure-building program in world history by facilitating up to $1 trillion of development projects across Eurasia and Africa. And the project is already having a profound impact on one region in particular: Southeast Asia.

Beijing dreams of transforming the region by realizing the long-term vision of completing a “Pan-Asia Railway” connecting southwestern China with Singapore via countries including Laos, Thailand and Malaysia.

The railway could kick-start a fresh wave of economic development in a region with an acute lack of world-class infrastructure. But China also faces scepticism from many groups in Southeast Asia that question China’s motives and credibility as a lender and partner, as well as the long-term viability of a hugely costly project.

Will China be able to make its high-speed dream in Southeast Asia a reality? In his new book High-Speed Empire: Chinese Expansion and the Future of Southeast Asia, journalist Will Doig attempts to answer this question through on-the-ground reporting in the countries at the heart of the Chinese-led project.

As he tells China Economic Review in this interview, Doig found that the reality of Belt and Road is often radically different to the headline-grabbing announcements he had read about in the press.

 

CER: Could you give us an idea of the scale of China’s infrastructure investment of recent years in Southeast Asia?

WD: It’s interesting. China keeps the parameters of BRI [Belt and Road Initiative] very vague, and that’s a purposeful thing. It’s easier not to fail when you don’t have very specific goals. People talk about BRI as an infrastructure plan but it’s really not so much a plan, but an idea guided by Beijing that often plays out in these individual, ad-hoc, on-the-ground ways with strong provincial influence.

So, at this point I don’t think the scale of China’s involvement in the Pan-Asia Railway is nearly as big as it seems in press releases, ceremonial ground-breakings and summits, and so on. China is a country that is very conscious of how the world sees it and it often makes these projects seem more prominent than they actually are – indeed, sometimes doing itself a disservice because things seem disappointing if you overpromise.

This has certainly been the case with the Pan-Asia Railway. For instance, China announced that they were building a railway with Thailand years ago, but there is still not an inch of track on the ground. In fact, the only part of the Pan-Asia Railway that exists is a small stretch of railway in Laos that was started in the last year. The Pan-Asia Railway has pretty much been put under the umbrella of BRI to make the initiative seem more important, but the truth is that many of the individual projects were already in the pipeline years ago and would have gone ahead anyway.

 

CER: So despite the name Pan-Asia Railway, track-building has yet to really dominate the nature of projects going on in the region by China?

WD: Its important to remember that BRI is not just infrastructure. There’s also a large software element to it such as opening up trade routes, controlling supply chains and making borders more permeable. That is probably having more success at present, but it’s less visible than physical infrastructure development would be. You might even say that a lot of the projects going on are not the main focus of China at all, but are just add-ons to the central goal of building stronger relationships with local governments.

 

CER: What are the drawbacks and potential risks that the Southeast Asian nations take on by accepting the spread of Chinese influence through these infrastructure projects?

WD: The overwhelming dynamic with these projects in Southeast Asia is: these small countries want Chinese cash and investment but are fearful of sacrificing too much bargaining power and valuable assets. However, it varies widely depending on the country you’re talking about. Laos, the one country that China has really made progress on building the railway, is a poor, dysfunctional, highly corrupt country with basically no power right up against the border of China. This has allowed China to enter Laos with relative ease. Thailand, on the other hand, has more money, power, and can more easily push back on China, which we’ve seen.

There’s almost no country in this region, however, or indeed anywhere in the world, that just wants to tell China to take a hike. They want the investment and the attention, but some countries, like Thailand, have instead mastered the art of stalling or distracting from going ahead with deals. Thailand doesn’t need the railway – the reason it will cooperate on its construction is to be friendly with China. But they have continuously showed something of an enthusiastic indifference towards Chinese diplomats, inviting them to events and showing interest but never allowing progress to be made.

In general, China does better in weaker countries, like Laos and Pakistan, but comes across greater resistance where governments are more functional and have more international power. The success of BRI will really hinge on whether or not China can convince these slightly more powerful nations that BRI is in their best interests.

 

CER: How much of China’s investment could be considered ‘debt-trap diplomacy’?

WD: The idea of debt-trapping is basically that China convinces a country to partner with them on a major, expensive project, with China offering attractive loans as the main financing stream. But for whatever reason – their economy is too small or interest rates on the loans still prove too high – the recipient can’t pay the money back and is forced into an equity swap where it gives China control of the project it has just built, a perfect example of this being the Hambantota port in Sri Lanka. Alternatively, the debtor nation offers support to China’s other geostrategic aims in return for concessions on the repayment, as we have seen in Cambodia.

I’m not so sure it’s happening as widely as reports might imply, however. I recently sat on a panel with two investors in BRI who were adamant that China was not debt-trapping any of these nations. Now, this is of course somewhat expected, but on reflection I think that they’re right. What China is often doing is much subtler: making such high investments in one particular country does coerce it into feeling obliged to support China, without any explicit demands or statements from either side being necessary.

One place we were seeing this was in Malaysia under the last administration. Malaysia has claims in the South China Sea that overlap with China’s, but since China has such huge investments in Malaysia, it took a much more conciliatory tone on how to resolve the issue, whereas other countries with similar claims have been much more aggressive and resistant to China’s expansion there. This is the more common, and in a way the more nefarious, dynamic.

 

CER: What was the mood you gauged from the people you spoke to during your travels in the regions that may be affected by the Pan-Asia Railway?

WD: I was surprised at how much enthusiasm there was for China among the local people. I went out there naively thinking that China was imposing itself and everyone was frightened of the growing influence and loss of autonomy. But actually, there was a lot of excitement in these countries, who haven’t received attention from a superpower in the way that China is giving it to them now in a long time. Especially in the business community, less so the further down the economic chain.

In Laos, for instance, which is an incredibly underdeveloped country, I felt a lot of people in the northern areas closer to China where construction has began to take place were quite unaware of the meaning of these projects, and instead were just slightly disapproving of all the Chinese presence, which has transformed towns with migrant workers and their families.

This sort of resentment, from the people that don’t feel that they will benefit from the changes economically, may pose a different kind of problem on a smaller scale for China.

 

CER: In the months since the book was finished, we’ve seen examples of opposition to Chinese-funded projects in Myanmar, Malaysia and Vietnam. Do you think this is just a temporary setback for China, or the start of a major shift?

WD: I don’t think the pushback is going to be a problem for China – it will find some in certain countries and, although scepticism is indeed growing in some places, China is also at the same time offering such a once-in-a-lifetime opportunity to leapfrog up the development chain that that will win the day for China in the end.

China’s best-case scenario is that it becomes savvier in how it is conducting these deals and projects. Let’s remember that China is still a very recent entrant into the global development finance game with a lot to learn.

 

CER: Do you think that China’s current method of investment finance in Southeast Asia will be a success in producing the Pan-Asia Railway?

WD: Whether or not a contiguous Kunming-Singapore railway route is built will not determine whether China’s activity in the region is successful. That was never the aim, but just a useful way to package together what China wants to do. Realistically, no one is going to take a train from Kunming to Singapore. So, whilst it doesn’t make much sense as a transportation network, it does make sense as a series of smaller networks that could benefit China’s trade interests.

One example could be the plans to link the Rayong industrial zone on Thailand’s east coast with Bangkok – two places where China has massive economic interests and could pay dividends much higher than the scale of the route might suggest.

China will build parts of the Pan-Asia Railway, but not the whole thing. And that will be just fine for what the government wants to achieve, namely integrating trade areas and opening up new markets for investment.

Will Doig is a journalist covering urban development, infrastructure, transportation, sustainability, globalism and governance. His new book “High-Speed Empire: Chinese Expansion and the Future of Southeast Asia” can be found here.