China's New Rail Project Could Fast Track One Of Its Neghbors Into Deep Debt

ByAriel Min

China is moving forward with its massive plan to build a 120 mph railway that would reach all the way to Singapore from Southwest China. Problem: The railway will have to go through some of its neighboring countries, including Laos, Thailand, and Malaysia — which could bring significant changes to these countries, for better or for worse.

According to the Telegraph, the project is set to be completed by 2019 and would require building “154 bridges and 76 tunnels, as well as 31 train stations,” just to get the railway from the Laos-China border to Laos’ capital city, which is about 260 miles in between. For an agricultural and rural country like Laos that only has two miles of functioning train track, this high-speed rail system would bring a significant environmental and economic changes in the next 5-6 years.

Image: The Telegraph

China has long been one of the biggest investors in Laos, as the latter provided minerals like potash and other resources like rubber. But the Chinese government has a bigger interest in Laos than just its resources — the Telegraph speculates that it would become an economic vassal for China in the future with the completion of this railway system.

But the bigger question lingers as Laos plans to borrow $7.2 billion $7.4 billion from Beijing to pay for its section of the railway, which would inevitably throw the country into one of the heaviest debts in its history, instantly making it world’s fourth most-indebted nation. Experts warned that this plan is simply unaffordable and predicted that the yearly interest on the loan would equal up to 20% of Laos’ annual government spending.

The Laos’ government is moving forward with the plan, even if it means destruction and transformation of many of its rural villages mostly because it can’t stop the Chinese. Since Laos is a landlocked country, it’s expecting the railway to possibly open up a cheaper and faster way to export goods and drive development of the impoverished economy.