In Depth: China’s Soaring Overland Trade Accelerates Cross-Border Rail Projects

[para. 1] Cross-border railway projects linking China with neighboring countries have seen significant progress, spurred by increasing regional trade and the efforts of Chinese infrastructure companies to explore new international markets. [para. 2] A major development occurred on February 26 when Vietnam's National Assembly Chairman approved an $8.37 billion railway project connecting northern Vietnam with China's Yunnan province. This project, expected to be completed by 2030, underscores the expanding rail cooperation in the region. [para. 3] China is also collaborating with Thailand, Mongolia, Kyrgyzstan, and Uzbekistan on various cross-border railway projects.

[para. 4] These rail projects aim to integrate Thailand and Vietnam into China's wide rail network, facilitating faster trade with Europe and providing Beijing with new routes that bypass Russia. [para. 5] Importantly, these initiatives align with China's Belt and Road Initiative (BRI), which seeks to enhance connectivity and trade across Asia, Africa, and Europe. [para. 6] Through BRI, Chinese rail developers have expanded their roles in overseas projects, taking on responsibilities from financing to operation, which helps manage complex challenges including political and financial risks.

[para. 7] Vietnam has accelerated its efforts for a railway connecting Haiphong to Lao Cai, influenced by the success of the China-Laos railway. [para. 8] This railway, inaugurated in December 2021, significantly reduced transportation time for goods between Europe and China via Laos. [para. 10] However, technical challenges remain as the current Vietnam-China railway links use different track gauges, necessitating changes at borders. [para. 12] Vietnam's push for a standard-gauge railway reflects its growing trade with China, which exceeded $100 billion in 2017, although progress is hampered by financial constraints. [para. 16] Additionally, Vietnam plans a $67 billion domestic high-speed rail project, but prioritizes the Sino-Vietnamese effort to alleviate potential financial burdens.

[para. 19] A significant development emerged with China Railway Construction Corp. winning part of the China-Kyrgyzstan-Uzbekistan railway bid, a project meant to shorten transit times between East Asia and Europe. [para. 22] This project, although economically advantageous, faced delays due to funding and engineering challenges but is now backed by substantial Chinese investment. Increased trade with Central Asia has boosted the project's viability, though technical issues such as differing track gauges remain. [para. 28] These Chinese endeavors in railway construction indicate a shift from being mere contractors to investors in global infrastructure.

[para. 33] Faced with a saturated domestic market, Chinese rail companies are seeking foreign opportunities. [para. 39] However, they are advised to adopt caution in investments due to geopolitical risks and rising operational costs. [para. 41] A shift toward investing in urban rail transit projects is recommended for Chinese firms, as these projects are potentially more profitable and less politically sensitive than large-scale international railways. [para. 43] The winning bids by Chinese companies for significant metro and rail projects in Dubai and Brazil highlight this strategic shift toward diversified investments.