China poised to become top trading partner of Laos in 2024

But some Laotians resent Chinese investment, saying they rarely see any benefits from it.
By RFA Lao
2024.02.28
China poised to become top trading partner of Laos in 2024 A staff member of PowerChina works at the Nam Ou 7 hydropower plant on the Nam Ou River in northern Laos' Phongsaly province on Sept. 27, 2022. The project was built by PowerChina.
Kaikeo Saiyasane/Xinhua via Getty Images

Chinese companies invested in 17 projects worth US$986 million in Laos in 2023, positioning China to soon become the landlocked country’s top trading partner, replacing neighboring Thailand, according to the Lao Ministry of Planning and Investment.

That’s nearly triple the amount in 2022 when Chinese investments totaled US$339 million for 30 projects.

The figure was shared at a meeting of the Laos-China Cooperation Committee in the Lao capital of Vientiane on Feb. 21-22, which reviewed trade with China and the country’s foreign direct investment, or FDI, in Laos.

But even as Chinese investment and trade pours in, many ordinary Loatians say they rarely see the benefits. 

They point to the forced relocation of residents who must give up farming land to Chinese concession holders to build factories, dams and their own industrial-sized farms. And the bump up in trade is driven to a great degree by products and agricultural goods that are exported to China, not sold domestically.

“Local people will have to live their lives uncomfortably if the government lets the Chinese investors come to Laos and do things that harm people,” said a villager from Pakxong district of Champassak province in southern Laos.

“This is not China; this is Laos,” he said, “and it does not mean that the Chinese investors can do everything they want once the government signs agreements or concessions to them.”

Attendees at the China-Laos Cooperation meeting highlighted the rollout of projects funded by grants from China, including the building of a railway operations training college, schools, and other initiatives designed to spur development in Laos, according to a report by the Vientiane Times.

Booming trade

The value of trade between the two nations rose 27% to just over US$7 billion in 2023 from US$5.7 billion in 2022, the report said.

Laos’ exports to China — including copper, rubber, cassava, bananas, salt and other agricultural products — totaled over US$3.7 billion for the year, an 11% increase, while the value of goods imported from China was estimated at about US$3.4 billion, a rise of 48%.

Chinese investment in both small- and large-scale projects has played a vital role in Laos’ economic growth and helped it to achieve its socioeconomic development plan goals and create jobs, an official from the Ministry of Planning and Investment told Radio Free Asia.

Chinese companies built the Phiawath Complete Secondary School building in Vientiane, capital of Laos. It is seen on March 30, 2023, before its handover to Laos. (Kaikeo Saiyasane/Xinhua via Getty Images)
Chinese companies built the Phiawath Complete Secondary School building in Vientiane, capital of Laos. It is seen on March 30, 2023, before its handover to Laos. (Kaikeo Saiyasane/Xinhua via Getty Images)

“It looks like it is the Lao government’s extraordinary policy to attract FDI from China,” said the official, who declined to give his name so to speak freely. “Many provinces throughout the country see the investment from China and concessions granted to Chinese investors.”

The official went on to say that China — Laos' largest source of foreign investment in the past decade — has become a very important trade partner. Since 1989, Chinese investors have invested a total of US$13 billion in 933 projects in Laos, according to a report issued by the Ministry of Planning and Investment in 2023.

The Lao government believes that by applying a strategic economic development plan along the lines of what the Chinese government does, Laos will emerge from its current status as a least-developed country and move to developing country status, as stated in its five-year socioeconomic development plan, the official said. 

Raw deal?

But many residents say they aren’t seeing the benefits in their income or standard of living.

A Vientiane resident, who like others in this report declined to be named out of fear of retaliation for speaking to the media, told RFA that Chinese investors pour money into Laos only for their own benefit and that in many cases people end up losing their farmland to Chinese-backed projects.

A resident of Phonehong district in Vientiane province told RFA that Laos has the potential to develop the country rather than to rely on Chinese investment. 

Natural resources and land are plentiful, but the Lao government does not have a good plan to promote and use them, he said. Instead, the government grants land concessions and mega- investment projects to Chinese investors and developers that don't have too little reward for citizens.

“We have a lot of economic potential to develop our country, but we are not able to do so,” he said.

The villager from Pakxong district in Champassak province said that the government should reconsider its economic cooperation policy with China because many Chinese investors just come to profit without caring about locals. 

He cited the example of the Sithandone Joint Development Co. Ltd. in Khong district, a joint venture between Lao and Chinese investors from Hong Kong, which forced 300 families in eight villages to relocate to make way for a development known as the Sithandone Special Economic Zone or new Siphandone area. 

The Lao government gave the firm a 99-year concession in 2018 to develop part of the zone near some of the country’s most beautiful natural attractions, including Southeast Asia’s largest waterfall, Khone Phapheng, and the Four Thousand Islands, a riverine archipelago near the Cambodian border.

In September 2023, the firm paid compensation for local farmers as it sought to begin work on a 36-hole golf course, but about 35 families refused to move as the company prepared to begin construction.

Families who used land near a main road received 800 million kip (US$40,000) per hectare, while ones farther from the road got 200 million kip (US$10,000), one of the landowners told RFA in a January report. At that time, the company still had to pay the full amount of compensation for people’s homes and other property, said the landowner.

Another Vientiane resident acknowledged the importance of Chinese investment to grow the Lao economy and create jobs, but that Chinese companies still receive most of the benefits.

“If we carefully observe the investment from China in Laos, it does not mean that all the investment from China is for the Lao economy and people,” he said. “Those investment projects belong to Chinese investors and are for their own benefit. Many investment projects from China do not really help develop Laos.”

Translated by Phouvong for RFA Lao. Edited by Roseanne Gerin and Malcolm Foster.

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