China slowdown puts breaks on Lao economy

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Vientiane at dusk
Vientiane at dusk

Laos, described by the World Bank as having “one of the fastest growing” economies in Asia-Pacific, is increasingly feeling the heat of a slowing economy in China, its most important trading partner and foreign investor.

A decade-long mining boom and rapid development of hydropower has seen Laos’ growth rate reach an average of over 7 per cent a year, creating several 100,000 jobs. China so far invested $6.7 billion in 760 projects in Laos, from mining to energy, agriculture, banking and trade, as well as in construction of commercial properties.

In terms of outward trade, Lao exports to China focus on mining and agriculture, especially rubber, while key imports are machinery and electronic equipment.

But the slowdown of China’s economy has put the breaks on bilateral trade and Chinese investment, according to Lao statistics. Two-way trade accelerated from just $1.3 billion in 2011 to reach $3.6 billion in 2014, but it dropped to $2.78 billion last year.

This could effect some large projects currently in the pipeline, namely the Chinese-funded $1.6-billion That Luang Lake residential and commercial complex covering 365 hectares in Vientiane, and the $6-billion high-speed rail line from Vientiane to the Chinese border.

The project, requiring 100,000 Chinese workers, was the mainstay of former deputy prime minister, Somsavat Lengsavad, but is now overshadowed by funding uncertainties. This could also affect Thailand as plans were to connect the railway with Bangkok and the Eastern Seaboard industrial zone in Thailand’s southeast.

It could also slow down the planned or ongoing construction of more large hydropower dams and an extension of Laos’ power grid to export energy to neighbouring countries, official say.

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[caption id="attachment_28588" align="alignleft" width="300"] Vientiane at dusk[/caption] Laos, described by the World Bank as having “one of the fastest growing” economies in Asia-Pacific, is increasingly feeling the heat of a slowing economy in China, its most important trading partner and foreign investor. A decade-long mining boom and rapid development of hydropower has seen Laos’ growth rate reach an average of over 7 per cent a year, creating several 100,000 jobs. China so far invested $6.7 billion in 760 projects in Laos, from mining to energy, agriculture, banking and trade, as well as in construction of commercial properties. In terms of...

Reading Time: 1 minute

Vientiane at dusk
Vientiane at dusk

Laos, described by the World Bank as having “one of the fastest growing” economies in Asia-Pacific, is increasingly feeling the heat of a slowing economy in China, its most important trading partner and foreign investor.

A decade-long mining boom and rapid development of hydropower has seen Laos’ growth rate reach an average of over 7 per cent a year, creating several 100,000 jobs. China so far invested $6.7 billion in 760 projects in Laos, from mining to energy, agriculture, banking and trade, as well as in construction of commercial properties.

In terms of outward trade, Lao exports to China focus on mining and agriculture, especially rubber, while key imports are machinery and electronic equipment.

But the slowdown of China’s economy has put the breaks on bilateral trade and Chinese investment, according to Lao statistics. Two-way trade accelerated from just $1.3 billion in 2011 to reach $3.6 billion in 2014, but it dropped to $2.78 billion last year.

This could effect some large projects currently in the pipeline, namely the Chinese-funded $1.6-billion That Luang Lake residential and commercial complex covering 365 hectares in Vientiane, and the $6-billion high-speed rail line from Vientiane to the Chinese border.

The project, requiring 100,000 Chinese workers, was the mainstay of former deputy prime minister, Somsavat Lengsavad, but is now overshadowed by funding uncertainties. This could also affect Thailand as plans were to connect the railway with Bangkok and the Eastern Seaboard industrial zone in Thailand’s southeast.

It could also slow down the planned or ongoing construction of more large hydropower dams and an extension of Laos’ power grid to export energy to neighbouring countries, official say.

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