China’s railway diplomacy on high speed in Vietnam

The Vietnamese government announced in April 2024 that it aims to start construction of two high-speed railway (HSR) lines in cooperation with China by 2030. One of the proposed routes will link Haiphong, a key port in the north of the country, with Lao Cai province bordering China’s Yunnan province, via the capital Hanoi. Another will connect Hanoi to Lang Son province, neighbouring China’s Guangxi province.

Traversing some of Vietnam’s key manufacturing hubs and FDI destinations, these lines should eventually become part of an expanded cross-country railway network, as envisioned by long-shelved but recently revived plans to modernise Vietnam’s rail system.

The two proposed railway routes will be important assets for Vietnam’s economy. Improved transport connectivity with China will deepen economic ties, particularly in tourism, trade and investment. Establishing passenger-dedicated lines will free up capacity on the existing cargo railways, which will be crucial as trade volume continues to grow and as manufacturing relocates to Vietnam from China due to rising production costs and geopolitical uncertainties. 

The new HSR lines will link up with the recently built lines extending China’s railway network to the Vietnamese border, facilitating imports of Chinese industrial goods and materials. When integrated into the broader transport network across Southeast Asia, Vietnam hopes to benefit from better connectivity with regional markets and further establish itself as an industrial hub and investment destination. 

Planners also seem to intend to leverage the project for industrial upgrading and broader development, mimicking China’s experience. China used HSR to acquire new technology and capabilities in the railway sector and as a springboard for a broader developmental agenda, creating new pockets of economic activity around the HSR lines.

There are also important symbolic aspects to capital developmental projects. The ability to deliver economic growth has been fundamental to the legitimacy of one-party rule in Vietnam. The HSR project, which symbolises modernity and development, will play into narratives of competent and effective governance. Understanding itself as a regional leader, modernising the national railway system is also a matter of status positioning for Vietnam, both domestically and internationally. 

But there are caveats to Vietnam’s HSR project. High-speed railway projects often fall behind their original deadlines and run over projected costs, raising questions about their cost–benefit ratio and financial sustainability. If the project faces delays, cost overruns or burdensome debt, it may not achieve its goals and will likely adversely affect the credibility of the Vietnamese government. Establishing terms that minimise these risks could prove crucial for defining the project’s long-term impact.

Vietnam must also carefully navigate the geopolitical and geoeconomic context. Hanoi’s relationship with China is burdened by territorial disputes in the South China Sea and Vietnam’s increasing closeness with the United States and Japan in defence and strategic relations. Making Beijing a stakeholder in a capital developmental project which aims to bring economic and strategic gains to both sides will help counterbalance security and strategic tensions and manage related risks. This exemplifies Vietnam’s policy of ‘cooperation and struggle’ towards great powers as it aims to strike a delicate balance between the United States and China while maintaining its autonomy.

It is currently unclear whether the larger north–south HSR route project will also be financed and constructed by China, since Hanoi has previously entered discussions with Japan. While the Vietnamese government could be seeking to balance relations with China and Japan by getting them both involved in this strategically important and economically lucrative railway project, Hanoi could also be instrumentalising this competition for its own benefit. As was demonstrated in the case of Indonesian HSR, bringing the two to compete for the project may result in more favourable terms of engagement when it comes to the price tag, financing conditions and structure of the project.

Sino–Vietnamese HSR cooperation also reveals dynamics related to China’s Belt and Road Initiative (BRI), in which exports of infrastructure have played a central role. Despite criticisms over the BRI’s financial burdens and political externalities, Chinese efforts to deepen ties with Southeast Asia through the development of modern regional railway networks have recently found new momentum. The completion and reportedly solid performance of China-built railways in Indonesia and Laos seem to have prompted Vietnam to reassess and expedite plans for developing railway infrastructure after years of ambivalence. 

This suggests that both the BRI and HSR projects remain important mechanisms for building foreign relations. Beijing’s reformulation and scaling down of the BRI with the slogan ‘small is beautiful’ may have misled some observers to believe that the era of large-scale financing and construction of capital infrastructure projects, characteristic of the BRI during the 2010s, is over. 

Yet the BRI remains shaped by pragmatic considerations. As long as the infrastructure gap continues to constrain Southeast Asian countries’ development and demand for infrastructure development persists, China will seek to leverage its experience and resources to deepen connectivity and integration with and across the region.

By Dragan Pavlicevic – EastAsiaForum.org – August 14, 2024