Laos shift from landlocked to land-linked by lowering transport costs, boosting trade, attracting investment and tourism
- strategicspace.nbr.org December 11, 2025
Stepping onto the Laos-China Railway (LCR) in Luang Prabang, the picturesque former royal capital in Northern Laos, brings a rush of aesthetic familiarity to anyone who has ridden the high-speed rail in China. From the train station massage chairs to the voice over the loudspeaker and the advertisements on seatbacks, the experience is decidedly Chinese. The result is both comforting and disorienting: riders feel they are not quite in China, but not quite all the way out of it either. China’s borderlands strategy of integration through connectivity results in borders that are blurred and shifted. The LCR is a physical manifestation of this new kind of borderland.
Opened in December 2021, the LCR is celebrated by China and Laos as a major accomplishment. President Xi Jinping called the LCR a “landmark project of high-quality Belt and Road cooperation.”1 The railway connects the Yunnan provincial capital of Kunming to Laos’s national capital of Vientiane, covering one thousand kilometers in less than ten hours—a trip that previously took days.2 It is a marvel of modern engineering, traversing the mountain jungle terrain of southern Yunnan and northern Laos with a long series of tunnels and bridges. It is the first leg constructed of China’s vision for a pan-Asia railway system connecting Kunming to Singapore via three trunks: Myanmar in the west, Laos and Thailand in the center, and Vietnam and Cambodia in the east.
This essay uses the LCR as a point of departure to examine the state and evolution of the Laos-China relationship so as to better understand China’s regional ambitions, interests, and self-conception as a good neighbor. As a highly visible physical representation of China’s growing presence in Southeast Asia, the railway is just one part of the country’s complex and multifaceted strategy of engagement and integration through connectivity. The LCR is the backbone of the Laos-China Economic Corridor and a foundational piece of the Laos-China “community with a shared future,” a broad 2023 arrangement for cooperation under economic, political, security, and “civilizational” pillars. The Laos-China community with a shared future expands the bilateral relationship beyond mere economic integration to become something much more comprehensive that will “reinforce the alignment of Laos’s national development strategy with the BRI [Belt and Road Initiative].”3
China is set to surpass Thailand as Laos’s largest bilateral trade partner in 2025 and is already its largest source of FDI, investing over $18 billion in 927 projects (more than double Thailand, which is the next largest investor).4 Chinese tourists are riding the LCR south into Laos, and Lao agricultural products are riding north.5 Chinese special economic zones (SEZs) and industrial parks have sprouted up like mushrooms after a rainstorm, attracting industry and investment. The relationship led to sustained GDP growth in Laos of 6%–8% per year until 2020, but also to environmental challenges, unevenly distributed benefits, dispossession, labor issues, and a debt crisis that resulted in a Chinese takeover of much of the power grid and that continues to threaten the Lao economy.6 Despite these issues, the Lao government has decided that reliance on China is the best path to development and modernization. The question that remains for the Lao government and people is how to adapt to the social and economic consequences of such heavy reliance on China.
Setting the Foundations: Borderlands and the Promise of Connectivity
Laos, landlocked in mainland Southeast Asia and bordering Yunnan Province to the north, Vietnam to the east, Myanmar to the west, and Thailand to the south, is a small country known for high mountains and natural beauty. Roughly the size of China’s Guangxi Province (2.5% of China’s overall land area), it has a population of less than 8 million (compared with Guangxi’s 50 million). Laos is one of Asia’s least-developed countries, and the population remains largely rural and employed in agriculture and other forms of resource extraction.7 Since 1975, it has been ruled by the Lao People’s Revolutionary Party (LPRP) through a single-party, Soviet-style authoritarian mode of governance.
Laos has long been on the periphery of empires, overlooked by outsiders—from the Siamese and Vietnamese to the Chinese and French. Prior to the colonial period, the area that is modern-day Laos was the site of various small kingdoms—most notably Lan Xang, a tributary state to the Ming and Qing dynasties. The French, who colonized Laos from 1893 to 1945 and made it a part of French Indochina, thought of it as a place for Vietnamese expansion and their own exploitation.8 Throughout history, descriptions of mountainous and landlocked Laos as a sparsely populated hinterland, both empty and full of potential, have persisted.
The memorandum of understanding for the LCR was signed in 2010, and the railway was constructed from 2016 to 2021. However, its roots are far older than the Belt and Road Initiative. French colonial railway initiatives in Indochina envisioned a railway through Laos as a means of realizing the country’s latent value through connecting it to the outside world.9 Modern Chinese descriptions of the LCR use the same language, declaring that the railway “realizes the Lao dream to convert from a landlocked country to a land-linked hub.”10
Over the past three decades, Laos has increasingly tied its development fate to China, betting that by acquiescing to China’s use of the country as a strategic corridor to access the rest of Southeast Asia and inviting in Chinese investment, it can escape “backwardness” and poverty.11 Modern Lao development policy both reflects historical conceptions of Laos as poor because of its isolation and also matches the Chinese infrastructure-forward, “build it and they will come” theory of development. Starting in the 1980s with a series of liberalizing economic reforms known as the New Economic Mechanism, the Lao state gradually began to loosen control over the economy and allow foreign investment. Lao development strategies focus on natural resource exploitation and connectivity as the main drivers of growth that will enable the country to graduate from being a least-developed country by 2026.12 In 2006, Laos implemented a policy to turn “land into capital,” which proposed to generate economic value through the commercialization of land.13 Another major development strategy has been to position Laos as the “battery of Southeast Asia” by exploiting the country’s significant hydropower potential and exporting energy to its neighbors. As of 2023, 75% of the energy produced in Laos was exported to neighboring countries—mainly Thailand, but China and Vietnam as well.14 Harkening back to the French railway initiative, another strategy (explicitly linked to BRI in 2019) seeks to take the country from “land-locked to land-linked.”15
While the Laos-China relationship is one of vast economic and political asymmetry, China views integration and connectivity with the periphery as just as vital to modernization as Laos does. The October 2013 Peripheral Diplomacy Work Conference elevated peripheral diplomacy to the strategic level of “being necessary to achieve the ‘two century’ goals and realize the Chinese dream of the great rejuvenation of the Chinese nation.”16 Li Xiao and Li Junjiu of Jilin University describe BRI as a strategic move by China to “‘stabilize and harmonize its surrounding areas,’ effectively offsetting the U.S.’s efforts to check China’s rise and the surrounding countries’ suspicion of China’s rise.”17 Wang Xiongjun of the Chinese Academy of Social Sciences wrote in 2024 that “in today’s era of deepening economic globalization, borders are no longer remote areas in the traditional sense, but rather strategic fulcrums for national development, important windows for the integration of civilizations, and frontiers for regional cooperation.”18
Laos’s particular strategic importance to China is multifaceted and reflects domestic economic factors, historical threats, and international ambitions. First, China sees Laos as a corridor for integration with Southeast Asia. Such integration is necessary for the development of China’s southwestern region, which has lagged economically behind the east.19 Second, Laos is a cache of untapped natural resources.20 Finally—and perhaps most importantly—infrastructure development along the border serves China’s national security interest. The mountainous borderland region between the two countries is home to upland tribal groups and ethnic minorities whose ancestral lands crisscross the border and have for centuries caused internal security concerns.21 Northern Laos is part of the infamous Golden Triangle, which also comprises northeastern Myanmar and northwestern Thailand and is known for opium cultivation, drug trafficking, illicit wildlife smuggling, and, more recently, telecommunication scam centers.22
Both sides envision connectivity as a kind of cure for historic marginalization. For China, it is a vital step on the path toward national rejuvenation; and for Laos, it is the only available path to prosperity.
Laying the Tracks: The Evolution of Chinese Engagement in Laos
The modern Laos-China relationship began in 1989 when the two countries normalized relations, following a period of high tension during the 1970s and 1980s in the lead-up to and aftermath of the 1979 Sino-Vietnamese War. During the 1990s, Chinese investment began to trickle into Laos. Development in northern Laos in that decade focused on basic infrastructure development to improve access and thus attract tourism as well as Chinese, Thai, and Vietnamese land investments.
China’s 1999 “going out” policy coincided with Laos’s own opening up to foreign investment. The beginnings of Chinese agricultural investments in northern Laos were driven by a combination of push and pull, global trends and local forces, top-down efforts and bottom-up action. The actors involved ranged from small-scale seasonal investors to massive tree plantations, and the earliest investments were small and informal contract farming schemes. The Lao government hoped that by encouraging foreign investment in land, it could achieve high growth rates and meet development goals, eventually graduating from being a least-developed country. This led to a boom in land concessions in the 2000s.23 In 2005, Chinese developers entered the hydropower space, and they are now involved in over half of the projects.24
In 2010 the two countries first signed a memorandum of understanding for the LCR, and in 2016 they established the Laos-China Railway Company as a joint venture to oversee construction, management, and operations of the railway. The Lao side holds a 30% stake in the project (though it also financed part of its share with a loan from the Export-Import Bank of China), while the Chinese side, headed by the state-owned China State Railway Group Limited, holds 70%. Due to its technical complexity, the project cost $5.9 billion.25 Total cross-border cargo freight volumes transported via the LCR reached 13 million tons in 2025 (though the amount transported on the railway within China was five times that amount).26 From 2022 to 2023, cross-border freight volumes nearly doubled, from 2.1 to 4.41 million tons.27 Yet, despite this brisk trade, more than half of domestic government revenues went to debt servicing in 2023.28
Like China before it, since the early 2000s, the Lao government has encouraged the development of SEZs as part of a strategy to transition to a more market-based economy, attract investment, and ultimately stimulate growth. Laos hosts fourteen SEZs, and China is the largest foreign source of investment in them. One Chinese-backed SEZ in northern Laos, the $10 billion Boten Beautiful Land, has been revitalized by the Laos-China Economic Corridor and the LCR.29 Though one of the largest infrastructure investments in Laos, the SEZ was largely abandoned after it was shuttered following a boom period as a notorious casino city from 2007 to 2011. Now, because of its proximity to the border and the LCR, this SEZ is being reimagined and reconfigured as a tourism center and trade and logistics hub.30
Signals and Standards: Institutionalization and Soft Connectivity
Standards-setting is a vital component of China’s borderlands strategy of integration. A 2023 People’s Daily article explains: “The smooth advancement of the Belt and Road Initiative requires not only ‘hard connectivity’ of infrastructure, but also ‘soft connectivity’ of rules and standards.”31 Not only was the LCR built to Chinese technical standards; railway authorities boast that recent high-tech integration continues to increase efficiency, including streamlined customs arrangements, cooperation on artificial intelligence; and 5G implementation at freight yards.32
Because much of the fruit produced in Laos is destined for China, Lao guidance for fruit producers now mirrors Chinese rules. Since 2021, Laos has rolled out product protocols for agricultural exports that use General Administration of Customs China requirements, including guidance on mangos in 2023 and updated guidance on bananas in 2024. The rail port in Boten-Mohan incorporates uniform paperwork, labels, and codes that match China’s systems, making Chinese requirements the organizing standard for export-oriented firms in northern Laos. In September 2025, China’s State Administration for Market Regulation and the Lao Ministry of Agriculture and Environment signed a memo to build the Lancang-Mekong Quality Infrastructure Exchange Center, coordinating metrology, standards, conformity assessment, and testing.
China is also ever more deeply integrated into the Lao power sector, which is central to Laos’s development strategy to become the battery of Southeast Asia. Overcapacity following overinvestment in the energy sector, financial losses, and the Covid-19 pandemic led to unsustainable debt distress that in 2020 forced Laos to cede control over much of the grid, including all high-voltage transmission, to China. The Lao energy authority, Electricite du Laos, formed a joint venture that granted China Southern Grid a 90% stake. China and Laos later established the China-Laos Power Standards Cooperation Committee in 2025, billed as the first intergovernmental body for power standards in China’s power industry. Objectives include standards setting, mutual recognition, and implementation of grid interconnection. In September 2025 the first Laos-China Electric Power Technology Forum was held in Vientiane to further integrate the Lao power sector into China’s. The forum focused again on setting standards and promoting the adoption of advanced technologies in the power sector, including ultra–high voltage transmission and smart distribution networks.33
Beyond technical standards setting, China exerts political influence over Laos through cadre training and “rule of law” cooperation between the two countries, which is explicitly part of the Laos-China community with a shared future. Cadre training cooperation between the two countries’ revolutionary parties is also an explicit part of this initiative. China’s vice-minister of justice said in November 2024 that China and Laos had “reached consensus” to jointly promote a Lancang-Mekong legal and justice cooperation mechanism and deepen bilateral justice cooperation. The China-Laos Socialist Rule-of-Law Research Center (co-built with the Lao Supreme People’s Procuracy) hosts training for Lao prosecutors and an annual forum in Guilin, Guangxi Province. Topics on the forum’s agenda include “Xi Jinping rule-of-law thought,” prison and procuratorial oversight, and juvenile prosecution systems.34 Over one thousand LPRP cadres have participated in such rule-of-law training in China.35
In 2023 and 2024, Laos and China held joint military exercises known as the Laos-China Friendship Shield.36 Hundreds of People’s Liberation Army soldiers rode the LCR to Vientiane to participate in the exercises. The 2023 exercises focused on training for a joint attack on a transnational crime syndicate in a mountain jungle environment.37 A September 2025 video circulated on Douyin shows a joint operation between Chinese and Lao police that resulted in the apprehension of 250 alleged telecom scammers in the Golden Triangle SEZ.38 In SEZs, security services operate along a spectrum of cooperation and Chinese independence from Lao oversight. In some cases, China provides policing services outright and has ultimate jurisdiction. For example, a hospital located in the Mohan-Boten SEZ on the China-Lao border assures would-be patients that they will be safe in Laos because security in the SEZ is under the control of the Kunming Public Security Bureau.39 In the Golden Triangle SEZ, which is jointly owned by the Lao government and Chinese-backed Kings Roman Group, reports state that the Lao police need special permission to enter the zone.40
Riding the Rails: Shifts in Chinese Engagement—Lao Agency and Adaptation
As Chinese engagement shifts and grows, the Lao state and Lao people are adapting to and reshaping that engagement. Following the boom of Chinese-financed infrastructure over the last decade, Laos is in unsustainable debt distress, and China is by far the country’s biggest creditor. The government took on large loans to pay for infrastructure and resource-extraction projects, but these projects have long and uncertain lead times before they generate revenue and growth. At the same time, it extended generous tax and other incentives to attract investment, which kept revenues low even as debt service obligations matured. Chinese loans also tend to not have the concessional terms used by development banks. Whereas in 2004 75% of Laos’s debt was on concessional terms, by 2019 the same percentage was on nonconcessional terms.41 Finally, the collapse of the Lao kip, driven by Covid-19 economic shocks, Russia’s invasion of Ukraine, and underlying vulnerabilities, exacerbated the country’s financial woes.
This does not mean that China has ensnared Laos in a debt trap. China has provided substantial assistance through the deferral of debt payments (totaling over $2.5 billion). Lao elites approved the projects financed by Chinese loans, while at the same time overseeing the sharp decline in government revenue. Nonetheless, China lent massively to a country with weak institutions and limited ability to absorb that investment.42
While Chinese actors tend to operate fairly independently from each other and the state, investments made in connectivity pave the way for other types of investment.43 For example, after global rubber prices dropped, He Xingye, chair of Chongqing Tianhai Real Estate Development Company, was considering selling his 1,000-hectare rubber plantation (an investment he made during Laos’s land boom in 2007). But the completion of the LCR has increased land value and renewed his interest in investing in the country.44
Moreover, as China’s own market matures and development slows, Chinese entrepreneurs look to places like Laos to make the kinds of first-mover advantage profits no longer available domestically. Yijing Group, a Chongqing-based conglomerate, was granted a 45-year monopoly in 2019 on the production of equipment, inspection, and personnel training related to fire protection in Laos because its founder, Zhu Ting, was able to leverage connections to convince the Lao Ministry of Public Security to specify Chinese products in new fire protection standards.45
Chinese tourism to Laos is also surging, and tourists from all countries are using the LCR. The northern Lao city and former royal capital of Luang Prabang received over 1.9 million tourists in the first half of 2025 (a year-over-year increase of 109.75%), of which 87% arrived via the LCR.46 Following this surge, services for Chinese tourists are increasingly visible in Luang Prabang.
Laos, for its part, is far from a passive recipient of Chinese projects; rather, it actively courts foreign investment as part of its development strategy, offering would-be investors generous tax incentives. However, the boom in land concessions in the early 2000s—driven by a surge in global commodities prices—had serious impacts on communities and the environment, which led to public backlash. Although the land that is transferred for concessions is owned by the state, it tends to be already in use by local communities. This, and concern about inappropriate use and disposal of agrichemicals, led to a moratorium on land concessions that was then introduced between 2007 and 2012.47
The single party–ruled Lao state relies on China to help it cope with the challenges of globalization and maintain political power at the same time.48 Instead of eroding the power of the Communist regime, Chinese engagement strengthens it by further entrenching state power. According to Kaysone Chansina, director of the General Office of the Lao National Academy of Political Science and Administration, “Western countries have inflicted countless wounds on Laos, and the separation of powers and two-party rotation in power are unsuitable for Laos’ national conditions. Laos will never follow the Western path of modernization. China’s path to modernization has provided a model and valuable experience for Laos’ modernization.”49
However, while Chinese engagement may further entrench the power of the Communist party-state, it does not necessarily build the institutional capacity of the Lao state. Reports indicate that the Lao state has limited law-enforcement capability in the Golden Triangle SEZ, which is still widely considered a hotbed of crime.50 Some Chinese entrepreneurs’ activities also blur the lines of sovereignty. When interviewed by the Mekong Center, one owner of a $40 million rubber investment was not aware that her project as a land concession was subject to Lao labor and environmental laws. Instead, the project was run according to Chinese standards and had been inspected by Chinese authorities as part of China’s Opium Replacement Fund Policy program—a fund created by China’s State Council that provides financial incentives for Chinese businesses to invest in agribusiness in northern Laos and Myanmar to help transition farmers away from poppy cultivation.51
On the ground, the Lao people’s reactions to Chinese presence are mixed and ambivalent. Laos has been slow to pivot its attention northward, being cut off from China physically by the longtime lack of north-south connectivity and lacking cultural or linguistic affinity. Although the language barrier between Lao and Chinese officials remains an obstacle to cooperation,52 many young Lao people (from the children of elites down to the middle class) now choose to study Chinese, citing better job opportunities and higher pay for people with Mandarin language skills.53 Nonetheless, some Lao people see the LCR as a Chinese project that serves Chinese interests and has little to do with them, or they perceive that Chinese businesspersons simply want to get rich quickly in Laos. A teak producer in Luang Prabang whose customers are in Vietnam shrugged at the LCR, though it passed near her plant: “It is for the Chinese people, not the Lao people,” she said.54
Conclusion: Beyond the Terminus
Almost all official language describing the bilateral relationship begins the same way: China and Laos share mountains of the same range and rivers born of the same spring (山同脉，水同源).55 This phrase captures not just the idea of common origin, common interests, and common destiny, but also that this common fate is deeply rooted in the land. It simultaneously recalls the unruly, infamous mountainous region at the border between the two countries (in the process of being brought to heel by Chinese infrastructure) and the mighty Mekong River they share. At the same time, it fully encapsulates China’s attitude toward its Southeast Asian neighbors: our fates are inextricably linked through proximity, through shared geography, through common cultural origins.
The LCR, Laos-China Economic Corridor, and Laos-China community with a shared future are all examples of the ways in which China seeks to reorient its regional space around itself, and they speak to the logic of integration through connectivity that underpins China’s regional strategy. They encompass both the hard connectivity of physical infrastructure and, increasingly, the soft connectivity of norms and standards. Ultimately, in Laos and beyond, China seeks to create an alternative vision for a regional order—one of peace and mutual prosperity through deep physical and economic integration achieved using Chinese technology and standards. If China is not at the top of this order, it is at least at the center—the place that all (rail)roads lead back to.
Elizabeth Cherchia was a 2024–25 Chinese Language Fellow at the National Bureau of Asian Research. She is a recent graduate from a Johns Hopkins University School of Advanced International Studies and Tsinghua University dual master’s program, where she focused on China’s infrastructure investments in Southeast Asia, energy finance, and energy security.
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