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What Chinese Dams in Laos Tell Us About the Belt and Road Initiative

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What Chinese Dams in Laos Tell Us About the Belt and Road Initiative

Analyzing Chinese dams in Laos provides insight into the local origins and drivers of the BRI, particularly along China’s borderland regions.

What Chinese Dams in Laos Tell Us About the Belt and Road Initiative
Credit: Depositphotos

With nearly $900 billion in investment across nearly 140 countries, China’s Belt and Road Initiative (BRI) has sparked significant debate. Much of this debate has focused on the professed grand strategic aims of the project, leading to greater emphasis on its geopolitical and geoeconomic dimensions, particularly its risks and opportunities. It is in this context that we get arguments between proponents of the “debt-trap diplomacy“ narrative and those who question it.

What is typically overlooked in these debates are the internal drivers of the BRI. Specifically, the BRI is largely about Chinese domestic development, which the Chinese Communist Party (CCP) has connected to social stability and security. This is notably important in China’s interior borderlands, which contain sizable cross-border minority populations and which successive Chinese political entities have struggled to effectively integrate to the greater Chinese polity. For Beijing, developing these areas is crucial for integration and social stability. Analyzing Chinese dams in Laos provides an understudied insight into the local origins and drivers of the BRI, particularly along China’s borderland regions.

Covering nearly 5,000 kilometers, the Mekong River originates in the Chinese Tibetan Plateau and flows through Myanmar, Thailand, Laos, Cambodia, and Vietnam. According to International Rivers NGO, the Mekong is one of the world’s most biologically diverse rivers and provides for the livelihood of nearly 65 million people in the Lower Mekong Basin (LMB). While the river is an ecological marvel and a cornerstone to those that live along its banks, the basin is also ripe for resource development in the form of hydropower.

China has an extensive expertise in hydropower development. Since the 1950s nearly 22,000 large (15 meters or more) dams have been constructed in China, including the world’s largest dam: the Three Gorges Dam. This expertise of dam construction has helped China develop a robust global export of dam development, with the Mekong River as one of the major locations of Chinese dam development abroad. According to the Mekong Region Futures Institute and the International Rivers Hydro Scorecard, around 55 percent of all Chinese overseas dams are in Asia; of that 55 percent, around 73 percent are in Southeast Asia. Within the Mekong Basin alone, 81 percent of overseas Chinese dams are in Laos.

From the Laotian perspective, the development of hydropower is key to expanding the export of electricity to the region and becoming the “Battery of Southeast Asia.”  While this objective makes sense from an economic perspective, from the ecological and social perspective, this desire for expanded hydropower development leaves a lot of questions. Dams are one of the most contentious infrastructure projects a state can pursue: loved by public officials for their economic and developmental potential, hated by locals and NGOs for their environmental and disproportionate social impacts. Environmentally, large dams cannot be considered “green”; according to a study in BioScience, dams actually contribute a notable amount of greenhouse gases into the atmosphere. Socially, dam development typically requires the relocation of those living in the surrounding area due to reservoir flooding. However, the relocations for these dams have rarely been financially equitable and result in families living farther away from their farms and livelihoods. In the long run, dams become a question of economic investment as well, since on average large dams seem to have a 96 percent cost overrun. The costs to maintain the dam impact the sale price of electricity and impact the consumers.

Given the contentious nature of dams, why would China consider pursuing these projects in its neighboring states? The answer to this question involves a closer look at the internal situation of China’s inland provinces.

Internally, China faces challenges in maintaining the economic development of its inland regions. While this issue has been known for some time, according to Frank Tang of the South China Morning Post, even in 2021 there is evidence of a widening gap between China’s coastal and inland regions. One of the inland provinces that is trying to “catch up” is Yunnan province, the inland Chinese province that hosts the Chinese flow of the Mekong (called Lancang in China). The development of Yunnan province – which borders Myanmar, Laos, and Vietnam – should be juxtaposed with the expanded development of Chinese hydropower in the Mekong and the BRI.

One of the methods to assist in the development of Yunnan has been the Bridgehead Strategy, which aims to improve the economic development and urbanization of Yunnan by pushing for increased construction of connective infrastructure and financial ties between Yunnan and Southeast Asia. This point was emphasized in the CCP’s 12h Five-Year Plan (2011-2015), which called for the “opening of border areas.” This plan for a bridgehead or a “gateway” essentially creates a singular entry point for investment, which “enters” through the capital of Yunnan, Kunming.

This becomes clear in the book “Rivers of Iron,” where the authors – David M. Lampton, Selina Ho, and Cheng-Chwee Kuik – analyze Chinese development of high-speed rails designed to connect Southeast Asia to Kunming. Here it’s clear how a connective infrastructure (high-speed rail) connects people and investment to China via Kunming, essentially turning Kunming into a trade hub connecting China to Southeast Asia.

The ethnic diversity in Yunnan province must also be considered. In Tim Summers’ book, “Yunnan A Chinese Bridgehead,” he explores the importance that the CCP places on maintaining a careful watch on all the ethnic minorities in China. Yunnan contains many minority ethnic groups that also are found in the neighboring Southeast Asia states.

While the transient nature of high-speed rail is an obvious example, how does hydropower fit into this? Consider that dams are integrative in nature and may be a vehicle for economic development. Dams may contribute to the growth of farmlands with irrigation, the flow of capital with river navigation, the spread of technological standards and expertise, and the generation and transmission of electricity. It is with the generation of electricity that the connection between China, Yunnan, Laos, and the BRI comes into focus.

As recently as last month, Reuters was reporting that China is facing a national “crunch” for electricity. Data from the University of Michigan China Data Center showed a trend in the rise of electrical output and the increasing GDP of Yunnan province from 2000 to 2019. However, while there is increased domestic output of electricity, the opportunity to import electricity into China is being also pursued. The U.S. Department of Energy stated in 2013 that the Chinese hydropower investments in Laos will export a significant amount of electricity into China. A report by the Asian Development Bank also highlights plans by Laos to create a long-term 500 kV transmission grid which connects Laos to all neighboring states, including China, where the planned transmission line would enter through Yunnan province.

In September 2020, Reuters reported on the Chinese state-owned enterprise (SOE) China Southern Power Grid Co (CSG)’s majority takeover of the Laotian SOE, Electricite du Laos (EDL), and the subsequent control of the Laotian electrical grid. Furthermore, in March 2021, Xinhua reported that EDL and CSG had announced the signing of a Concession Agreement. This agreement will make CSG “serve as the country’s national power grid operator to invest in, construct and operate the 230kV-and-above power grids in Laos and implement grid interconnection projects between Laos and its neighboring countries.”

While the Laotian government may portray this as a process of friendly relations, the control of the Laotian electrical grid by a Chinese SOE does spell some concern. Laos will be allowing Chinese SOEs to operate and control key infrastructure within its borders for the next 25-30 years. After that, the aged infrastructure coupled with compounding impacts of climate change and ecological degradation may render these dams an inefficient operation and Laos will be saddled with the long-term costs (both economic and environmental) while the short- to medium-term benefits may be heading to China.

Succinctly, it appears that China is leveraging its financial, political, and geographic positioning in the Mekong Basin to facilitate the development of hydropower projects in the Lower Mekong Basin to simultaneously develop its neighboring state, creating a prospective trade market; establish Yunnan as the focal entry into China; and utilize Chinese operated hydropower in the region to export electricity back into China and power the development of Yunnan province. However, outside of the internal considerations, these hydropower projects are openly tied to the BRI and other BRI projects. According to China’s leading hydropower developer, PowerChina, planned dams in Laos are expressly marketed and designed to power the “construction of China-Laos Railway and Laos’ ‘Southeast Asia Battery.’”

Chinese dams in Laos are more than just a slab of concrete that makes electricity. These dams are an instrument for local development, but also regional integration through energy generation. Chinese SOE control over the electrical grid and dams offers an ability for China to import a percentage of the electricity into China, assist in pursuing domestic development in the Chinese interior, and promote social stability and security. This type of downstream control allows China to benefit from these dams while relegating the negative impacts to Laos; in essence, China is having its cake and eating it too.

But, more broadly, these dams highlight that the BRI is not a monolithic plan. A Chinese dam in Laos is not equal to a Chinese dam in Ecuador. To truly understand the BRI, we must contextualize each of the projects, the local beneficiaries, and the Chinese motivations.