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Kunming-Singapore High Speed Railway construction starts

By 2020, China’s FTA with ASEAN nations will get another big boost; a 3,900km high-speed railway system linking China’s Kunming through Laos, Thailand, and Malaysia down to Singapore becomes operational and construction has already started. See my hand-drawing in the regional map below to get a sense of scope of this project. China’s trade with the ASEAN countries has sky-rocked to $292.78 billion in 2010, the year the FTA went into effect. ASEAN countries exports to China at $154.56 billion already dwarfed the U.S.’.

3900km High Speed Railway between Kunming and Singapore

Before I talk more about trade, let’s refresh our memory of the East Asia (+U.S.) geopolitics in the months leading up to the Obama administration’s ‘getting back into Asia’ pronouncement.

First, there was the supposed sinking of the South Korean navy ship, Cheonan, during a joint U.S.-South Korea military exercise, which a U.S.-South Korean lead ‘international’ investigation concluded the North responsible. Russia rebuked the conclusion after looking into the evidence with China also not agreeing to blame the North.

Then there was the shelling of disputed Yeonpyeong island by North Korea killing South Korean marines and civilians. A Chinese fishing trawler and a Japanese coast guard ship colliding near disputed island (Diaoyutai/Senkaku) just north of Taiwan.

Russian President Medvedev landed in one of the disputed Kuril Islands promising further development (and I suggested Foreign Minister’s resignation was due to it). ASEAN countries supposedly invited the U.S. to join a regional forum, but nobody signed up to say anything bad about China.

(For completeness, I mind as well add in the Takeshima/Dokdo dispute with South Korea, because Japan is so embroidered up northeast.)

The March 2011 earthquake and the ensuing tsunami came, then everything went quiet.

Well, arguably, Wikileaks was another earthquake with the epicenter in Washington, D.C..

So, what now?

With that said, the opinion I would like to share is rather simple. When the aggressive geopolitiking and military schoolyard nonsense are kept at bay, doesn’t everything seem much more peaceful? (I am talking about East Asia in case it is not clear.)

Back to this Kunming-Singapore high speed railway; I think it will play a major role in accelerating the trade between China and ASEAN countries. According to this report,

Furthermore, energy and goods that Japan and South Korea need can also be transported to both countries through this railway network of global significance.

The railway network will facilitate the movement of goods and people, improve the efficiency of economic activities, and help create a more peaceful and stable geopolitical environment.

By the way, the red outline is just me connecting the dots, and I wanted to use the map to visualize this massive under-taking. After completion, Vietnam and Cambodia will become linked with Thailand and Myanmar further by train.

I applaud the recent KORUS free trade agreement between South Korea and the U.S.. ASEAN+1 is already in effect, and the next step will be ASEAN+3, adding South Korea and Japan. China is already Japan’s largest trade partner, so this expansion is rightfully to be expected.

In the future, as more developed countries advance, trade will become a more important factor in standards of living anywhere on the planet. And I applaud China’s leaders in making free trade a priority.

Want more examples? President of the European Council Herman van Rompuy is currently in China in talks with President Hu Jintao to expand trade. EU needs all of China’s help it can get in financing as well as market access. China could use more high-technology exports from the region.

Chinese Commerce Minister Chen Deming is in Brazil talking to Trader Minister Fernando Pimentel on “China, Brazil open wider for each other.” (For some reason, this headline sounds funny.) Though trade volume is still modest, China-Brazil trade is expected to grow 20% in 2011 to $37 billion.

Imagine that kind of growth percentage wise between China and the U.S.?

Don’t forget the just completed Strategic & Economic Dialog between those two countries. Lets hope they yield concrete results. Otherwise, it seems certain U.S.’s trade volume with China will decline as a percentage of China’s overall. And I predict ASEAN to over-take America soon.

In terms of high speed rail, I will be impressed when the U.S. leads in building one connecting Canada down to Mexico. And it cannot for the lack of examples.

Categories: Analysis, economy, Opinion, politics, trade Tags:
  1. pug_ster
    May 17th, 2011 at 08:55 | #1

    I don’t see anything special in terms of trade. However, it might increase cultural and social exchange though.

  2. silentvoice
    May 17th, 2011 at 10:19 | #2

    a 3,900km high-speed railway system linking China’s Kunming through Laos, Thailand, and Malaysia down to Singapore becomes operational and construction has already started. See my hand-drawing in the regional map below to get a sense of scope of this project.

    There are two potentially misleading parts in blog post above, though I’m sure it is unintentional, the readers might get the wrong picture here.

    First, it is not such a giant project. It only involves connecting regional rail lines that are already in place. For example, Singapore is already connected by rail all the way to Thailand. It’s not as if China is funding and building the entire distance. They are probably just building a few hundred km here and there. My guess is they would need to build some infrastructure between China and Laos, and between Laos and Thailand. The rest are pretty much in place.

    Second, it is not “high speed” as we know it. The current speed for the KTM (Keretapi Tanah Melayu) line running between Singapore and Malaysia is about 70 km/hr, as I recall. (Freight rail might be slower) If they want to run anything faster than that, it will involve laying an entire new track from scratch which is going to be very costly.

    It took Malaysia and Singapore almost 2 decades to decide where to place a train station. Let alone come to a decision about a new track. I am almost certain a “high speed” rail is out of the question.

  3. pug_ster
    May 17th, 2011 at 12:24 | #3

    Actually, I think they are going to lay a new high speed track. The distance between Kunming and Singapore is more than 3000km, which takes more than 10 hours do the math.

  4. May 17th, 2011 at 13:24 | #4

    @pug_ster
    I should have elaborated an American example, because I see this high-speed rail having a similar type of impact for the over-all region that can come from infrastructure. The U.S. Interstate highway system is widely recognized as one of the best public projects in the history of America. Below is a section on the economic impact alone over a 4 decade period:

    http://www.publicpurpose.com/freeway1.htm#econ

    IMPACT OF THE INTERSTATE HIGHWAY SYSTEM

    Impact on the Economy

    The interstate highway system has had a profound effect upon the American economy and contributed significantly to improved economic efficiency and productivity.

    By increasing speed and expanding access, freight costs have been reduced substantially. Tractor-trailer operating costs have been estimated at 17 percent lower on interstate highways than other highways.

    NOTE: Benefits of Interstate Highways (Washington, DC: United States Department of Transportation, Federal Highway Administration, 1983).

    The interstate highway system made less expensive land more accessible to the nation’s transportation system and encouraged development.

    The travel time reliability of shipment by interstate highway has made “just in time” delivery more feasible, reducing warehousing costs and adding to manufacturing efficiency.

    By broadening the geographical range and options of shoppers, the interstate highway system has increased retail competition, resulting in larger selections and lower consumer prices.

    By improving inter-regional access, the interstate highway system has helped to create a genuinely national domestic market with companies able to supply their products to much larger geographical areas, and less expensively.

    Each of these cost reducing impacts have made both labor and capital more efficient and this has encouraged business expansion, new investment, and job creation.

    Through the years, various estimates have been made of the contribution of the interstate highway system to the economy, generally finding that the interstate highway system has more than paid for itself in improved commercial productivity.

    NOTE: See for example, Benefits of Interstate Highways (Washington, DC: United States Department of Transportation, Federal Highway Administration, 1970) and Benefits of Interstate Highways (Washington, DC: United States Department of Transportation, Federal Highway Administration, 1983).

    A recent study indicated that with respect to non-local roads (arterial highways, especially the National Highway System, which includes the interstate highway system), each dollar of investment in highways produces an annual reduction in product costs of 23.4 cents, with larger cost reductions in the early years and smaller reductions in more recent years.

    NOTE: M. Ishaq Nadiri and Theofanis P. Mamuneas, Contribution of Highway Capital to Industry and National Productivity Growth (Washington, DC: United States Department of Transportation, Federal Highway Administration, 1996).

    While an interstate specific estimate is not available, it is likely that this most productive sector of non-local roads contributes even more per invested dollar than the non-local road system.
    Using the results of this research, it is estimated that the interstate highway system is now producing approximately $14 billion.

    NOTE: In 1996 dollars, based upon year of construction expenditure. Throughout the balance of the report all financial data is in 1996 dollars, unless otherwise noted. in annual producer cost reductions.
    This annual economic benefit is estimated to have peaked in 1970 at approximately $38 billion. Over the 40 year period, it is estimated that gross producer cost reductions have exceeded $1 trillion (1) — more than three times the gross original investment in the interstate highway system (2This represents a substantial economic benefit, which is likely to have created employment and reduced consumer prices ) — permitting the financial resources of consumers to be stretched to purchase more than would be otherwise possible.

  5. May 17th, 2011 at 13:31 | #5

    @silentvoice

    I also read about the regional railway build outs in the region. This high-speed artery will help expedite the shorter local route investments in Southeast Asia.

    China invested 1 trillion RMB in her economic stimulus (2 years ago?), and I read somewhere 37% of that went into rails.

    As I was saying above, like the U.S. interstate investment, the rail in China and beyond will have a very substantial impact in the region.

  6. pug_ster
    May 17th, 2011 at 17:49 | #6

    yinyang,

    I would disagree. The US highway system are for consumer cars and commercial trucks carry cargo. Chances are that they won’t carry any cargo in the high speed rail lines because it is not economically feasible to do it. According to this article,

    http://www.business-in-asia.com/asia/SKRL_railway.html

    There is no direct rail line from China to Singapore, but perhaps China will probably fund a separate slower rail line for cargo. So I guess you’re partially right about this one.

  7. May 17th, 2011 at 20:55 | #7

    @pug_ster
    Ha, okay, in about 10 years time we can revisit this point to see who turns out right. 🙂

  8. May 18th, 2011 at 13:23 | #8

    Occasionally I check our blog stats to see who is linking to HH and what they are saying. This one comment over at the Canadian the Globe and Mail gave me some laughs:

    squire barnes
    4:43 PM on May 17, 2011
    Warning: The following is from a blog of a Taiwanese guy who is pro-China so the comments could be biased but it gives a good idea of where and how the power shift is working.

    {{

    Kunming-Singapore High Speed Railway construction starts
    May 17th, 2011 yinyang

    By 2020, China’s FTA with ASEAN nations will get another big boost; a 3,900km high-speed railway system linking China’s Kunming through Laos, Thailand, and Malaysia down to Singapore becomes operational and construction has already started. See my hand-drawing in the regional map below to get a sense of scope of this project. China’s trade with the ASEAN countries has sky-rocked to $292.78 billion in 2010, the year the FTA went into effect. ASEAN countries exports to China at $154.56 billion already dwarfed the U.S.’.

    }}}

    http://blog.hiddenharmonies.org/2011/05/kunming-singapore-high-speed-railway-construction-starts/#more-11785

    China is relying less on exports to developed countries such as the US and Canada but focuses more on exports to Africa, the ASEAN countries and Latin America.

    Haha. Notice what I highlighted. I wonder what that ‘warning’ is all about. Is there something subliminal in my passage’s ‘bias’ the person quoted?

    A ‘Taiwanese’ guy – a mix up between Allen and me. Bunch of my relatives live there though, and I have been to Hsinchu on business numerous times. Those relatives would have been persecuted during Mao’s reign as dizhu (地主) had they remained on the mainland. Some of my other relatives who remained were.

    A ‘Taiwanese’ guy who is ‘pro-China’ – – ha, the last time I saw Allen, he wasn’t that scary looking. He looked just like his gravatar portrait:

  9. May 20th, 2011 at 00:25 | #9

    Proximity is always important – for one, exchange of physical goods is taxed less due to lower transportation costs. Map of China’s FDI by region below (source: China Daily). All signs point to a rapidly expanding region as a trading bloc.

  10. May 26th, 2011 at 10:11 | #10

    HSR to Singapore from China thru Laos will give the US quite a jolt!

  11. raventhorn2000
    May 27th, 2011 at 06:02 | #11

    Related, I saw a documentary on the construction of the Qinghai Tibet Railroad. Simply amazing.

    Chinese engineers came up with some incredible solutions for building railroad on the permafrost terrain of the Tibetan highland, with low cost.

    And the speed and efficiency of the construction was also staggering.

    When Chinese immigrants help build the transcontinental railroad in US, they were hardly acknowledged.

    It is good to see that today, Chinese engineers and workers are able to use their talents to benefit Asia.

  12. wwww1234
    May 27th, 2011 at 17:31 | #12

    this may not be as rosy as you indicated.
    see http://www.21cbh.com/HTML/2011-5-25/xOMDAwMDI0MDMxOA.html

    mind you 21 cbh is under the southern news media group, an “opposition” news organization funded by the government. Its reporting inclination often has an ultra-liberal and oppositional view point.
    Kunming is becoming an attractive city for winter homes for some overseas chinese. You can get to Hong Kong very quickly for medical care when needed.

  13. June 11th, 2011 at 09:23 | #13

    That’s a super construction…

  14. Khouanechay Souphanthavong
    October 29th, 2011 at 18:20 | #14

    I am laotian and 100% support this project, its will helps my country, China and the rest of Asean nation becomes modernize and prosperous society.

  15. pug_ster
    January 1st, 2013 at 12:57 | #15

    http://www.nytimes.com/2013/01/02/world/asia/china-builds-a-railroad-and-laos-bears-the-cost.html?hp&_r=0

    I just can’t help by looking at NY times propaganda, it seems that Western nations don’t want Laos to succeed, warning that putting up this railroad will put Laos’ “macroeconomic stability in danger” and thinking that Laos will bear the majority of the cost.

  16. Zack
    January 1st, 2013 at 18:36 | #16

    @pug_ster
    exactly how do these Western former colonists of Asians think that this HSR will endanger Laos’ ‘macroeconomic stability’
    jealousy much?

  17. January 1st, 2013 at 21:10 | #17

    @pug_ster

    The Exim Bank of China’s loan term is 30-year, 2% annual interest with a 10-year grace period. It can clear the 25% concessionality requirement by a mile to qualify as OECD ODA aid. If it’s a deal between any Western countries (or Japan) and Laos, the headline should read as “China Provides $7 Billion Aid to Laos.”

    What’s the matter with these NYT reporters? The UNDP spells as United Nations Development Programme.

    If it only links up China and Laos, the railway isn’t economically viable. However, in the grand scheme of things, it also is an important link between China, a $8 trillion economy, and close to $1 trillion combined economy of Thailand, Malay Peninsula and Singapore. The logistic market of China is already $1.5 trillion in 2012 (larger than that of the EU27 or the US*). If this line becomes a major freight link, Laos will get on the China gravy train, no pun intended.

    The best case scenario for Laos would be the profit from freight and passenger traffic alone can pay off the Chinese loan after the grace period ends, then all external economic benefits will be Laos to enjoy. The worst case scenario, just ask China to restructure the loan term. For anybody who has followed the story, it’s Laos that has been vigorously pursuing this.

    BTW, both this line and another $5 billion line between Laos and Vietnam (funded by Malaysia) will use standard gauge. A very interesting development…

    * Other than being “energy inefficient”, China is also supposed to be “logistic inefficient”. I think it’s far easier to think the Chinese GDP is severely understated.

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