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29 Dec 2022

International Economy

Second year of China-Lao PDR high-speed railway…to benefit from China’s relaxation of zero-Covid measures


        While the China-Lao PDR high-speed railway is entering its second year of operation, transport of goods between southern China and ASEAN is expected to become more active. China’s potential reopening following positive signals on gradual relaxation of its zero-COVID measures will generate greater benefits for trade and tourism through the route.
Over the past year, cross-border trade has gained from the convenience offered by this route. Thanks to intergovernmental cooperation, customs clearance is now rapidly conducted, while the areas for goods transfers are suitable, and plans to construct another bridge over the Mekong River to link with Thailand’s high-speed railway in the future are in the pipeline. Regarding private sector involvement, private businesses are acting as service agents to provide more access for SME operators.
        In 2023, tourism via high-speed train will be evidently boosted by China’s easing of its Covid prevention measures, which could lead to opening of its borders in the second quarter of 2023. Chinese tourists alone are expected to generate tourism income to Lao PDR at 0.1-0.4 percent of GDP. During the first 10 months of 2022, Luang Prabang saw 335,794 visitors arrive by high-speed train (equal to 85 percent of total arrivals in Luang Prabang, while another 15 percent traveled by air), most of which were Thai and Laotian tourists. The high-speed railway has become more popular, as it is faster than trips by road, and cheaper than air travel. After China’s reopening, it is likely that Laotian tourism will resume its performance in the pre-COVID period, wherein Chinese visitors of approximately 1 million constituted the second-largest group of tourists, and Luang Prabang is expected to remain one of the country’s most visited tourist destinations.
        On account of faster transport time and lower freight costs by more than 30 percent, passengers and cargo numbers via high-speed rail have continued to increase. Total transported goods reached 2 million tons, and passengers 1.26 million persons. Trade consisted of merchandise to China, namely, rubber, barley rice, cassava flour, coffee, ores and fertilizers, while goods from China included machinery, automobiles and electronics, and daily life commodities. The high-speed railway is the “game changer” for this route, which was rarely used in the past due to its treacherous and steep geographical conditions. Over the first nine months of 2022, total trade value was Baht 11.8 billion, or 5.3 percent of the overall cross-border trade with China, most of which, or Baht 11 billion, was Chinese goods to Thailand, consisting of electronics, photovoltaics and fruits. With respect to Thai products destined for China, they were fruits and electronic circuits, totaling Baht 1.5 billion.
        More marketing options have been presented for transport development between China and ASEAN, wherein all transport routes are beneficial for regional businesses. Currently, there are four land transport routes liking China, Lao PDR and Thailand, i.e., 1) China-Lao PDR high-speed railway; 2) 4th Thailand-Lao PDR Friendship Bridge that connects China’s Yunnan Province via Chiang Khong Customs House and Bo Keo province in Laos; 3) 2nd Thailand-Lao PDR Friendship Bridge: Mukdahan – Savannakhet province; 4) 3rd Thailand-Lao PDR Friendship Bridge: Nakhon Phanom – Khammouane province. A fifth route, the 5th Thailand-Lao PDR Friendship Bridge: Bung Kan – Bolikhamsai province, is now under construction with completion expected in 2024.
        China President Xi Jinping’s participation in the recent APEC 2022 meetings reaffirmed China’s cooperation in the construction of high-speed railway in Thai territory to ensure that the route opening can occur in 2028 as planned, which will enhance seamless transport through the entire route. This route will serve as another linkage of southern China and Lao PDR to marine transport at the Gulf of Thailand. Upon completion of the railway in Thailand, KResearch estimates that transport time via the China-Lao PDR-Thailand high-speed railway will be reduced by more than 70 percent.

International Economy