Geopolitics

China's Big Designs On Small And Strategic Laos

Hillary Clinton's historic visit this week to Laos highlights the reality on the ground: China's influence grows bigger with each passing day. There are decidedly mixed opinions about what Beijing will bring.

Chinese stores line a village in Luang Namtha province (Prince Roy)
Bruno Philip

LUANG NAMTHA – Hillary Clinton's visit to Laos this past week, as was well noted, marks the first appearance here by a U.S. Secretary of State since 1955. Clearly, it has also been noted –- particularly in Washington -- that Laos is a country under the powerful influence of Beijing.

The Chinese government has already invested $4 billion in Laos, joining Vietnam and Thailand as the country's main partners. In fact in 2011, China replaced Vietnam as the top foreign investor in the Lao People's Democratic Republic, as Laos is officially known. The country's single-party, Communist government has been in power since the victory of the "revolutionaries' in 1975.

The heightened Chinese presence brings with it a certain amount of mistrust not to say out-and-out hostility in Laos. This is typical of the ambiguity marking relations between China and southeast Asian countries, split as the latter are between the necessity of trading with the People's Republic and a natural reflex of distrust at its cumbersome proximity.

China weighs especially heavily on the shoulders of ethnically-diverse Laos, which is landlocked and under-populated. In the capital, Vientiane, an intellectual who is no fan of China says: "When the Chinese piss in the Mekong, we're the ones that drown..."

A major – and highly controversial – project involving the Chinese is the construction of a railroad line for a high-speed train that would link Kunming, the capital of the Chinese province of Yunnan, with Bangkok via Laos. The line would ensure rapid access to Malaysia and Singapore from southwestern China.

The Laotian part of the massive project is slated to be 70% financed by the Chinese, to the tune of $7 billion. The train tracks will cover a distance of 480 kilometers (298 miles), of which 200 km (124 miles) are tunnels and bridges.

In 2011, however, the project was postponed indefinitely by the Laotian government. Chinese demands may explain the postponement: they were asking for use of the land – several hundred meters worth, sometimes as much as 10 km (6 miles) -- on either side of the tracks.

A changed landscape

By using the land for farming and real estate development, the Chinese would be reimbursing themselves, and would additionally be providing jobs for thousands of Chinese workers who would descend on the suburbs of Luang Namtha, the capital of one of the provinces along the Chinese border.

Area farmers already understand what would await them once construction starts. "The railway line will cross straight through my village, then that road over there before entering a tunnel built into the mountain," says "Uncle" Kumpan, making a sweeping gesture with his arm that encompasses an asphalt road and surrounding hills and jungle-covered mountains. "And since it will run through our village, we will have to move out."

A member of the minority Kmou tribe, Kumpan is a small, frail man of 66. He lives in Ban Guen, a village in a valley where the population earns a living from salt mining. "We were told that we would be relocated over there, behind the mountain. I'm fine with that, because it means I finally get to live in a proper house with my family," says Kumpan optimistically.

In Luang Namtha, many Chinese merchants run businesses in a part of the market located near a large main street that looks like the Far Eastern version of an outpost in an American Western film. Shop-fronts with Chinese lettering are increasing all over the region. "A lot of merchants selling electrical home appliances, TVs, computers and mobile phones have come over," says Thip, a Laotian woman who is watching television in the tiny shop where she sells T-shirts.

In the "Chinese" part of the market dozens of electronics shops are huddled together. A man who gives his name as Mr. Liu says he comes from Hunan province in western China. In a mixture of Chinese and the Hunan dialect – and a bit wary of a foreigner asking him questions – he says: "Business is okay, yes..."

"The Chinese come here and buy everything we have to sell, and we buy the low-priced Chinese things they sell. The Chinese are bringing us prosperity," says Sen, a 31-year-old Hmong woman who owns 1,000 rubber trees in the neighboring hills.

In the capital, Vientiane, the increasing Chinese presence is also making waves. In 2007, the government signed an agreement with a consortium of three Chinese companies. They were to build a luxury residential complex that included a shopping mall and restaurants around a swampy area near the famous Pha That Luang Buddhist stupa, a symbol of the nation. Because some of the land belonged to party members, this caused an uproar – even in a country where the right to demonstrate doesn't exist. The upshot was that the government canceled the project in 2009.

"Some people have started to say that certain party members are selling the country down the river to the Chinese," says a Laotian businessman. "When people heard there was going to be a Chinatown in Vientiane, they didn't like it. They didn't like it at all!" laughs a high-level official. "But we'll get the project up and running again. Only this time we won't call it Chinatown!"

photo - Prince Roy

Read more from Le Monde in French

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Economy

European Debt? The First Question For Merkel's Successor

Across southern Europe, all eyes are on the German elections, as they hope a change of government might bring about reforms to the EU Stability Pact.

Angela Merkel at a campaign event of CDU party, Stralsund, Sep 2021

Tobias Kaiser, Virginia Kirst, Martina Meister


-Analysis-

BERLIN — Finance Minister Olaf Scholz (SPD) is the front-runner, according to recent polls, to become Germany's next chancellor. Little wonder then that he's attracting attention not just within the country, but from neighbors across Europe who are watching and listening to his every word.

That was certainly the case this past weekend in Brdo, Slovenia, where the minister met with his European counterparts. And of particular interest for those in attendance is where Scholz stands on the issue of debt-rule reform for the eurozone, a subject that is expected to be hotly debated among EU members in the coming months.

France, which holds its own elections early next year, has already made its position clear. "When it comes to the Stability and Growth Pact, we need new rules," said Bruno Le Maire, France's minister of the economy and finance, at the meeting in Slovenia. "We need simpler rules that take the economic reality into account. That is what France will be arguing for in the coming weeks."

The economic reality for eurozone countries is an average national debt of 100% of GDP. Only Luxemburg is currently meeting the two central requirements of the Maastricht Treaty: That national debt must be less than 60% of GDP and the deficit should be no more than 3%. For the moment, these rules have been set aside due to the coronavirus crisis, but next year national leaders must decide how to go forward and whether the rules should be reinstated in 2023.

Europe's north-south divide lives on

The debate looks set to be intense. Fiscally conservative countries, above all Austria and the Netherlands, are against relaxing the rules as they recently made very clear in a joint position paper on the subject. In contrast, southern European countries that are dealing with high levels of national debt believe that now is the moment to relax the rules.

Those governments are calling for countries to be given more freedom over their levels of national debt so that the economy, which is recovering remarkably quickly thanks to coronavirus spending and the European Central Bank's relaxation of its fiscal policy, can continue to grow.

Despite its clear stance on the issue, Paris hasn't yet gone on the offensive.

The rules must be "adapted to fit the new reality," said Spanish Finance Minister Nadia Calviño in Brdo. She says the eurozone needs "new rules that work." Her Belgian counterpart agreed. The national debts in both countries currently stand at over 100% of GDP. The same is true of France, Italy, Portugal, Greece and Cyprus.

Officials there will be keeping a close eye on the German elections — and the subsequent coalition negotiations. Along with France, Germany still sets the tone in the EU, and Berlin's stance on the brewing conflict will depend largely on what the coalition government looks like.

A key question is which party Germany's next finance minister comes from. In their election campaign, the Greens have called for the debt rules to be revised so that in the future they support rather than hinder public investment. The FDP, however, wants to reinstate the Maastricht Treaty rules exactly as they were and ensure they are more strictly enforced than before.

This demand is unlikely to gain traction at the EU level because too many countries would still be breaking the rules for years to come. There is already a consensus that they should be reformed; what is still at stake is how far these reforms should go.

Mario Draghi on stage in Bologna

Prime Minister Mario Draghi at an event in Bologna, Italy — Photo: Brancolini/ROPI/ZUMA

Time for Draghi to step up?

Despite its clear stance on the issue, Paris hasn't yet gone on the offensive. That having been said, starting in January, France will take over the presidency of the EU Council for a period that will coincide with its presidential election campaign. And it's likely that Macron's main rival, right-wing populist Marine Le Pen, will put the reforms front and center, especially since she has long argued against Germany and in favor of more freedom.

Rome is putting its faith in the negotiating skills of Prime Minister Mario Draghi, a former head of the European Central Bank. Draghi is a respected EU finance expert at the debating table and can be of great service to Italy precisely at a moment when Merkel's departure may see Germany represented by a politician with less experience at these kinds of drawn-out summits, where discussions go on long into the night.

The Stability and Growth pact may survive unscathed.

Regardless of how heated the debates turn out to be, the Stability and Growth Pact may well survive the conflict unscathed, as its symbolic value may make revising the agreement itself practically impossible. Instead, the aim will be to rewrite the rules that govern how the Pact should be interpreted: regulations, in other words, about how the deficit and national debt should be calculated.

One possible change would be to allow future borrowing for environmental investments to be discounted. France is not alone in calling for that. European Commissioner for Economy Paolo Gentiloni has also added his voice.

The European Commission is assuming that the debate may drag on for some time. The rules — set aside during the pandemic — are supposed to come into force again at the start of 2023.

The Commission is already preparing for the possibility that they could be reactivated without any reforms. They are investigating how the flexibility that has already been built into the debt laws could be used to ensure that a large swathe of eurozone countries don't automatically find themselves contravening them, representatives explained.

The Commission will present its recommendations for reforms, which will serve as a basis for the countries' negotiations, in December. By that point, the results of the German elections will be known, as well as possibly the coalition negotiations. And we might have a clearer idea of how intense the fight over Europe's debt rules could become — and whether the hopes of the southern countries could become reality.

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