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Home›Output gap›Laos opens railroad to China as debt to Beijing rises

Laos opens railroad to China as debt to Beijing rises

By Paul Gonzalez
December 4, 2021
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BEIJING (AP) – After a blessing from Buddhist monks, Laotian Prime Minister Phankham Viphavanh on Friday made the first trip of a $ 5.9 billion Chinese railroad that connects remote and mountainous Laos to southern China with the aim of increasing trade.

Both governments tout the 1,035-kilometer (642-mile) line between the Laotian capital, Vientiane and Kunming, in poor southwest China, as a stimulus for economic growth. But that leaves a debt that foreign experts warn Laos, a country of 7 million people wedged between China, Vietnam and Thailand, could struggle to repay.

The railway is one of hundreds of projects under Beijing’s Belt and Road Initiative to build ports, railways and other facilities across Asia, Africa and the Pacific. Poor countries welcome the initiative, but some complain that they owe too much to Chinese banks.

The first train left Vientiane following an inauguration ceremony led by Chinese President Xi Jinping and his Laotian counterpart, Thongloun Sisoulith, via a video link from their capitals, the Laotian news agency reported.

Lao monks in saffron robes held a ceremony for the railroad on Thursday, according to the Lao News Agency.

The railroad is only required to carry goods across the border at this time due to restrictions on passenger movement to contain the coronavirus.

The Kunming-Vientiane railway is a link in a possible future network linking China to Thailand, Vietnam, Myanmar, Malaysia and Singapore. This would give southern China better access to ports and export markets.

Chinese entrepreneurs are building a high-speed rail line between the Thai capital, Bangkok, and the Laotian border. This will not be completed until 2028 and will leave a gap between the border and the line to China.

The borrowed money represents 60% of the railway investment. Foreign experts say this is unusually high for an infrastructure project and increases the risk that the railway will not generate enough revenue to pay off its debt.

Laos has been one of the fastest growing economies in the world over the past decade, but remains one of the poorest. Its average economic output per person has more than doubled since 2010, but stands at $ 2,600.

Copyright 2021 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed without permission.

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