On southwestern fringe, China's Silk Road ambitions face obstacles

Sat Jun 4, 2016 10:55pm EDT
 
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By Brenda Goh and Simon Webb

KUNMING, China/VIENTIANE (Reuters) - For the southwestern city of Kunming, China's plan to extend a high-speed rail link 3,000 km (1,875 miles) south to Singapore is already a boon: pristine expressways, a gleaming station and something of a real estate boom, as young buyers crowd property showrooms.

In Laos, work has yet to start on what should be the first overseas leg of a rail line stretching throughout Southeast Asia. The country, one of the region's poorest, could struggle to finance even part of the $7 billion cost and has yet to agree financial terms with China.

From Laos, the railway would enter Thailand. But Beijing's negotiations have soured there as well, in part over financing, adding to a growing headache for China and highlighting the sort of problems Beijing may face as it develops its economic highways beyond Southeast Asia and across Asia under its "One Belt, One Road" project.

The ambitious plan to build land, sea and air routes reaching across the continent and beyond was announced by President Xi Jinping in 2013 with the aim of boosting trade by $2.5 trillion in the next decade. As China’s economic growth slows, Beijing is encouraging its companies to win new markets overseas.

But across the Southeast Asia border, China is facing the most complex and possibly most significant obstacles to its ambitions, as its neighbors protest what they say are excessive Chinese demands and unfavorable financing conditions.

They have resisted Chinese demands for the rights to develop the land either side of the railway. Beijing says turning a profit on land development would make the rest of the project more commercially viable and allow it to make a greater upfront financial commitment. Myanmar, in addition, had environmental concerns and canceled its part of the project in 2014.

For China, Southeast Asia's concerns are "going to be the first significant hurdle as they implement One Belt, One Road," said Peter Cai, a research fellow at Lowy Institute for International Policy in Sydney.

China's foreign ministry and the Export-Import Bank of China did not respond to requests for comment.   Continued...

 
Train cars belonging to the Kunming metro wait to undergo maintenance in Kunming, Yunnan province, April 13, 2016. REUTERS/Brenda Goh