News / Economy

    Laos Looks to Balance China’s Growing Economic Influence

    FILE - A farmer works in a paddy field under the power lines near Nam Theun 2 dam in Khammouane province, Oct. 28, 2013.
    FILE - A farmer works in a paddy field under the power lines near Nam Theun 2 dam in Khammouane province, Oct. 28, 2013.
    Ron Corben

    China’s growing influence in Laos, marked by expanded investment and trade, has led some international agencies to warn Laos about an unhealthy financial dependence on China.  Analysts say Laos is looking to balance China’s influence by drawing support from longstanding backer Vietnam as well as the West.

    In 2014 China became Laos’ leading investor with funds totaling more than $5 billion, with projects in mining, resources, hydropower and agribusiness.

    Laos and China have agreed to build a $7 billion high-speed railway project, part of China’s strategy of ‘One Belt, One Road’ plan of rail links across Central Asia as well as South East Asia.

    The train routes into South East Asia will begin in Kunming in China’s Yunnan province, with its more than 150 bridges, 76 tunnels and 31 train stations running through Laos, to Vientiane. From there it will connect to Thailand with plans of trains eventually reaching Singapore.

    China's influence expanding

    Carl Thayer, a defense analyst at the University of New South Wales says the investment marks a further extension of China’s influence, especially into countries of the Association of South East Asian Nations (ASEAN), especially Thailand, Myanmar, and Cambodia.

    “It’s all part of both China’s push to develop its trading route southward and improve the infrastructure - ASEAN connectivity - and obviously wanted by Thailand because it will go through Laos and wind up in Thailand," he said. "You have a steady accretion of China - the high-speed rail makes Laos go heavily into debt for concession loans.”

    Analysts say the loans, with Laos using the country’s untapped minerals as collateral, will sharply increase Laos’ debt, with the borrowings representing almost 90 per cent of the country’s annual economic output.

    The Asian Development Bank (ADB) says the rail line investment is unaffordable for a small economy of six million people, who mostly rely on agriculture to make a living.

    Hydropower investments

    China is also a leading investor in hydropower, with several dams planned to be built on tributaries from the Mekong River with reports indicating China is preparing to sign contracts for up to nine new dams. Laos’ northern provinces rely on electricity from China, as most Laos hydropower power is exported to neighboring Thailand.

    Analysts say China’s dominant position is raising fears over destruction of biodiversity, land eviction and unemployment among displaced farmers.

    Chulalongkorn University political scientist, Thitinan Pongsudhirak, says China sees Laos as a key step in widening its influence in the region.

    “Of the countries involved, Laos is most at risk of coming under China’s domination. Laos is a small country, small economy and China is not afraid to make the mainland South East Asia space into its own backyard. It is doing that now," he said. "Mainland South East Asia is completely in China’s orbit."

    Laos’ economic growth is running at close to seven percent, but remains dependent on areas generating low employment, such as resource extraction and hydropower.

    The World Bank has called on Laos to diversify its economy in order to generate employment for the more than 90,000 new entrants coming on to the labor market each year.

    Laos’ financial state has also been weak. In July last year the government appointed a new finance minister amid a widening budget deficit with the government. A decree calls on the general public to tighten household budgets and curb spending.

    Thitinan says the weak financial position adds to Laos’ vulnerability.

    “Financial constraints have put Laos in a precarious position. The Laos macro economy is not in good shape. As a consequence it has had to rely on China and China plays this very well - by extending more loans and more projects into Laos. So Laos has to be very careful,” he said.

    Striking a balance

    Historically, Laos has had longstanding close relations with neighboring Vietnam, dating back even before the Indochina wars of the 1960s and 1970s. These strong ties have continued between the communist governments since the Indochina wars.

    But Martin Stuart-Fox, emeritus professor of History at the University of Queensland, says China has developed a policy aimed at weakening the bonds between Laos and Vietnam.

    “As Chinese economic influence increases - it goes hand in hand with increasing political influence," he said. "The Chinese have always been determined that they are going to be at least as influential as the Vietnamese. There was a decision in Beijing that Laos was not going to be just left as a Vietnamese sphere of influence.”

    Analysts say the Lao government recognizes a need to strike a balance between China and Vietnam, and draw support from the West.

    In 2016 Laos will take up the chair of ASEAN, seen as an opportunity for Vientiane to gain leverage and bargaining power in dealing with its larger neighboring rival powers.

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    Comment Sorting
    Comments
         
    by: No name from: Laos
    May 06, 2015 6:19 AM
    Actually Lao people respect both people from China and Vietnam. But we are really uncomfortable and upset with aggressive and irrespective behaviors of Chinese and Vietnamese in Laos. The climate has been worse and worse since you came. Every where from north to the south are crowed with such group of selfish people ranked from illegally uneducated workers and small merchants. I don't really understand why you flow into Laos like this in spite that your economies are much more better than us. We are feeling that we lose benefits rather than gaining. We never like what you behave in our country but can only do nothing just following the government. Lao government may misunderstand about economic development and national security. Please respect to Lao people as they repect you. We need your help but not your population or culture to replace ours.

    by: Charles Young
    April 26, 2015 1:32 PM
    To understand what China is doing in Laos/to Laos is to look at it at a macro-economic point of view; Laos itself is of little value to the Chinese overall economic. The total population in Laos is approximately 6 million, the latest statistic, that is about the same population of a mid level Chinese city. However, one might ask what then is China doing in Laos? Two quick points: Laos is a conduit to the rest of the South East Asian Nations, and rich in natural resources, i.e. timbers, gold e.t.c. The strategy in play by the Chinese Govt is not new; financial loans will continue to flow to Laos and at some point the Lao Govt will not be able pay them back. This will give the Chinese Gvt an entry into Laos from the front door and legitimately taking over most, if not all, of the major economic interests and financial institutions. In essence, Laos as a country is effectively over! What is a concern to me is that the current leaders are willing to farm out any project to the Chinese at will with kickbacks. In the end, the good folks in Laos are going to suffer beyond measure. The article should serve as is a warning notice to the Lao People. I am a concern Hmong-American; I returned from a trip to Laos two weeks ago. I noticed in Vientiane, there are stretch of roads with Chinese businesses and China town settings. These sub districts are not built for the Lao People. It is a concern. A Chinese company is building what they termed "Economic Zone" in the heart of Vientiane, again, this is not for the Lao Folks.
    In Response

    by: Zendi
    May 01, 2015 7:13 PM
    I don't think the Hmong nor the Hmong-American are apart of the Laotian social and cohesive civil social society. Remember the Hmong isolated themselves from the rest of the Laotian populations and do no have a history of cohesively associated or mingle with the Lao elites or majority. There fore, they do not represent the future of the Laotian or the Lao people overall.

    The future of Laotian are with Chinese and Lao to rebuild the lost generation and lack of population growth. The Hmong have no part into this notion. And it shouldn't be the Hmong-American concern or Hmong overseas to still linger the thought about Laos. Laos has change and the Laotian has already made their mind politically and socially in a different path then the Hmong would think. The Hmong-American should forget about Laos and move on.
    They do not represent the overall Laotian people or Laos because of lack of Hmong socially cohesion with the major Laotian populations that is now turning away from it.

    by: Zendi
    April 25, 2015 12:02 PM
    This articles titles should rename to " Laos counter balancing Vietnam Influence" instead. Cambodia is doing so at a rapid pace. Why shouldn't Laos? Laotian needs to be free from the oppress Vietnam influence that brought nothing more then corruptions or progress to the Lao people.
    In Response

    by: Zendi
    May 01, 2015 7:03 PM
    Laos tremendously needs to push its own development and agenda within the regions much grander with the regional stages. China is the logical choice for Laos and its position. The old idea is out of the trash, and the region is changing.

    Since I am not Hmong. I don't think Laotian or Lao in the majority elites would even look to the Hmong-American for such future social affairs. You have to remember that the Hmong were never really associated with the main majority of the Laotian populations. And the Hmong were self isolated from the rest of the Laotian ethnic, and even the natives people to say they are even considered a part of the Laotian and the future people that that could represent Laotian overall.

    The Hmong aren't apart of Laos anymore. They will only go into history as a pawn for the U.S wars and perhaps a social unrest political problems for the Laotian and Laos future existence into the international community. The Hmong-American should forget about Laos and move on.

    The future of Laos is lies with the notion of people from Laos and the Chinese to rebuild and raise new generation of Laotian.
    In Response

    by: Nkajlo Vangh from: USA
    April 29, 2015 2:33 PM
    Zendt, Cambodia and Laos had 2 different situations. China had helped Cambodia against tyrant Polpot and Vietnam's invasion. In Laos, China had teamed up with Vietnam to suppress Lao opposions, particularly the Lao-Hmong. In the 80's, China and Vietnam had agreed to divide Laos into 2 parts using Hwy 8, north of Savannakhet as the divided line if Viet agreed to kick Russia out of Da Nang naval base. Viet did that. Currently Viet controls southern Laos as agreed.

    So your balancing Test is just a ploy in favor of China.

    by: Laonation from: USA
    April 25, 2015 9:52 AM
    I do respected all of you guys comment. I am not a Political &Science degree but I am one of millions Lao Citizens in this continent. I have learned on Laos PDR Politic to World Wide. It was not bad as you guys think. Don't look underestimate on that. Soon or later you will see Laos Country With Laotians new generation they know how to run their country to become a development Country in the regions. I still believe and have a dream on that , we will be successful. Just take time step by step. Laos governments are smart enough to maintain the situation to run their Country.
    In Response

    by: chu li lee from: America
    May 21, 2015 5:49 PM
    I totally agreed. Everything takes time and people are so quick to judge the Chinese mentality.

    by: williweb from: Phoenix Arizona USA
    April 24, 2015 2:42 PM
    Why don't the Laotians just sell dope like everybody else in the region. Then there will be lots of money, greed, corruption and war.
    In Response

    by: Zendi
    April 24, 2015 9:14 PM
    We did that before along with CIA American service men selling dope to the American soldiers for cash crop in secret during the long Vietnam war. Perhaps our past corporation can be sold again directly to the American people back home. Everyone knows dope is popular in America and its a very Western thing to get high secretly within society.

    by: Nkajlo Vangh from: USA
    April 24, 2015 10:43 AM
    It's a story to be comcerned. I have read "The Art of War" mentioned by a commentator on this VOA article. I believe that it's not 100% China's ambition. Laos has been ignored by the West for more than 30 years while letting Vietnam to destroy Lao oppositions, including the use of chemical weapons. Lao PRP's cultural corruption then saw China as the Golden Chicken and invited her to lay eggs in Laos. China on the other hand saw the poor Laos as a great potential repo collateral. Who to blame the most? Not China for sure but Lao PRP, Vietnam, and the U.S.
    In Response

    by: Zendi
    April 24, 2015 9:24 PM
    You can't really blame Laos for this position. Vietnam for years has its ambition to take over the country and displacing the Lao people without anything in returned. The Laotian overseas can't returned because they are being killed off and supported by Hanoi and its pressure against Laotian leaders for years against its own people political threats and future threats.

    If anyone is to blame after decades of Western silent and weaken relationship with Laos. It is Vietnam playing the games with everyone and Laos is critically in Vietnam political and social sphere to oppress and destroy others of different view and political notion within the regions.

    The only option Laos will survive is to pull in China and rebuild Laos to counter against Vietnam war games since the Vietnam War ended.
    In Response

    by: phetsakhat sorphainam from: vientiane
    April 24, 2015 11:20 AM
    chinese is brainwahing lao government by helping laos and I hope lao government know that, but vienamese goverment are watching very closely because they ( viet) don't want to lose laos to any body elase so it won't be easy for Chinese to get involve.

    by: Oversea Laotian from: USA
    April 24, 2015 9:25 AM
    Japan is the only country which has a potential to counter balance the Chinese economic influence in Laos but not Vietnam.
    In Response

    by: CTLao from: USA
    April 24, 2015 11:29 AM
    By the way both China and Japan are encouraged to play the role in helping the tinny landlocked Laos to lift itself from poverty. The economic influences are positive and welcome from any friendly country.

    by: Anonymous
    April 23, 2015 9:27 PM
    What ever China does or does not do, the western medias and governments always have nothing good to say; they bend on demonizing China no matter what.
    If China were to create Eve by pulling a rib from Adam, the women right NGO will call bloody sexism and if China were to create the Sun, the environmental NGO will go apes because of radiation. At the end, having women and the sun are good things.
    Non (western) government organization indeed, I under line NON.
    In Response

    by: chu li lee from: American
    May 21, 2015 5:54 PM
    you are absolutely right...people will judge the chinese in a negative ways no matter what they do. I personally don't like the uneducated chinese myself but the new generation are smart, intelligent and they are the world better leaders in business wise that is.
    In Response

    by: Zendi
    April 24, 2015 9:02 AM
    This articles doesn't mentions that Vietnam for years has been trying to displace the Lao people in Laos. And killing Lao overseas and inside for their political ambition of mass displacement of the Lao people by elimination. Vietnamese never really like the Lao people nor do they have any social and political ties that is even strengthen.

    The greed and power Vietnam wants to keep for the purpose of some day goes against the West as if it choose to exterminate Western influences in the regions in favor of Vietnam. Basically Vietnam is using the West for its own gain and powers. Not for the regions, Not for Laos or its neighbors. It's all sugar coating dealing with Vietnam and the Vietnamese.
    In Response

    by: Hoang from: Canada
    April 24, 2015 5:50 AM
    It is because China never does anything good for anybody but their own greedy agenda for invasion without fight in Chinese book "the Art of War".

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