Vietnam and China lay the tracks for deeper trade connectivity

On 19 December 2025, Vietnam’s Deputy Prime Minister and Minister of Foreign Affairs Bui Thanh Son pressed the ceremonial start button to launch the Lao Cai–Hanoi–Hai Phong railway. The 390-kilometre railway, backed by US$8.4 billion in funding, marks a move into the ‘hard connectivity’ phase of the ‘China-Vietnam Community with Shared Future that Carries Strategic Significance’ vision.

But the project also carries complex strategic considerations. While this route follows the historical footprint of the Yunnan–Vietnam railway opened in 1910, the current project represents a critical upgrade within the ‘Two Corridors, One Belt’ Initiative, connected to China’s Belt and Road Initiative. It is tasked with opening a major maritime gateway for southwest China, updating the eastern route of the Pan-Asian Railway and further integrating industrial and supply chains between China and Vietnam.

Developing an international railway hub oriented toward South and Southeast Asia — a strategy framed as ‘moving from the plateau to the sea’ — is central to Yunnan’s mission to secure maritime outlets . The completion of the railway will facilitate goods to travel directly from Yunnan to the Lach Huyen deep-sea port in Hai Phong, Vietnam. This project is essentially a modernisation of existing capacity to enhance connectivity, one of the prioritised cooperation areas between China and its neighbourhood, especially among the Lancang-Mekong Cooperation member countries.

The Vietnamese government regards this railway project as critical infrastructure to help link international supply chains. Besides stimulating economic growth, the project will accelerate Vietnam’s industrialisation and modernisation. The heavy reliance of Vietnam’s manufacturing sector on Chinese supply chains is a key economic driver for railway cooperation. The production of Vietnam’s key import and export commodities, like agricultural products and textiles, is highly dependent on Chinese raw materials and markets. Northern Vietnam’s industrial heartland is also emerging as an international base for electronics giants, yet Vietnamese factories operated by major multinational technology corporations largely rely on component supplies from China.

A key development with the new railway line is the transition to standard-gauge tracks. Vietnam’s railway system consists primarily of narrow-gauge tracks, requiring a problematic transfer of goods at the border. The new international standard gauge will shorten transit times and streamline the flow of goods. The new railway is a single-track electrified line with a design speed of 160 kilometres per hour on the main route, intended to handle both passenger traffic and high-density freight operations.

With the international standard gauge, the Lao Cai–Hanoi–Hai Phong railway will shorten transit times and streamline the flow of goods across the border. Such seamless industrial and logistical coupling pulls northern Vietnam into the economic orbit of China’s southwest.

The formal launch of this project has been widely interpreted as a symbol of strengthening bilateral political trust between China and Vietnam. In April 2025, for instance, the Vietnam–China Railway Cooperation Joint Committee was established to implement intergovernmental rail agreements. This partnership manifests through practical support, with China providing technical and human resource training for Vietnam, while the Lao Cai–Hanoi–Hai Phong railway project itself integrates a portion of loan capital from China.

On the other hand, for its larger-sized domestic North–South railway, Vietnam seems to avoid structural reliance on any single foreign partner. Hanoi is doubling down on a state-led approach, prioritising domestic financing such as public funds and government bonds. Vietnam also balances by engaging international partners like Spain in competitive talks to secure the best possible terms for financing and technology transfer.

Balancing is a common choice for ASEAN states. In recent years, Vietnam’s balancing strategy for industrial development has become increasingly differentiated — collaborating with the West in high-tech sectors such as 5G, chips and semiconductors, and partnering with China in transportation, agriculture and cross-border e-commerce.

Through the Lao Cai–Hanoi–Hai Phong standard-gauge railway, Vietnam is signalling goodwill towards China and securing tangible economic benefits while maintaining strong relationships with other countries. But both sides must actively coordinate their respective strengths — Vietnam’s appeal to multinational investment and China’s large markets and supply chain advantages — to fully realise the benefits of southwest China’s international expansion and Vietnam’s regional integration.

By Duan Haosheng – Eeastasiaforum.org – March 28, 2026