The economics of a new China-Laos train line

IN THE LATE 1860s, French sailors who had set off from Saigon to find the source of the Mekong river encountered the precipitous Khone Falls between Laos and Cambodia, and realised that the waters would be impassable for larger trading vessels. Their dreams of reaching the riches of southern China by river were dashed. Quixotic plans for rail networks followed, first from British and French imperialists, and then from the Association of South-East Asian Nations (ASEAN), which in 1995 outlined its ambition to connect Singapore with Kunming, in China’s Yunnan province.

On December 3rd, at long last, a portion of those aspirations was realised. A high-speed rail line connecting Kunming to Vientiane, the capital of Laos, was opened after five years of construction. The route is part of China’s Belt and Road Initiative, and the completed section comes with a hefty price tag of $5.9bn—equivalent to nearly a third of Laos’s annual GDP before the pandemic.