Thayer Consultancy Background Brief:

ABN # 65 648 097 123

Will Vietnam and China
Upgrade the Railway Linking
Kunming and Hai Phong?
December 7, 2023

Xi is expected to visit Hanoi from 11-12 December. There is a lot of talk about
discussions between China and Vietnam on opening a new rail link (the current rail
line was built in colonial times and is on a separate rail gauge). We request your
insights into the following questions:
Q1. What do you know about the proposed railway with China, and its connection to
rare earths?
ANSWER: Vietnam has long been pushing China to assist in upgrading cross border
infrastructure, especially the Kunming to Lao Cai-Hai Phong railway. In November, for
example, Prime Minister Pham Minh Chinh issued a statement calling for an upgrade
to this railway. The primary objective is to enhance cross border trade. Vietnam would
welcome China’s commitment to assist in developing this infrastructure.
The question of developing Vietnam’s rare earths is a separate issue. Vietnam would
like to see competitive bidding. Vietnam would welcome foreign investment, including
from China, to improve Vietnam’s ability to exploit and process rare earth minerals.
For example, when Xi Jinping met General Secretary Nguyen Phu Trong in Beijing in
late October 2022 the two leaders discussed “creating better conditions for Chinese
businesses to invest and operate in Vietnam.”
Q2. Do you think this is likely to go forward?
ANSWER: It is possible as both sides have given priority to developing transportation
infrastructure (aviation, land and railway). According to Radio Free Asia (October 19,
2023), “China has already mapped out a number of projects if Vietnam were to
eventually agree to take part in the Belt and Road Initiative, including railway routes
from the northern provinces to Hanoi and the port city of Haiphong, a North-South
high-speed railway and a North-South highway.”
Q3. What domestic reaction can we expect in Vietnam?
ANSWER: It depends on what kind of agreement is reached between China and
Vietnam. If large numbers of Chinese workers are involved this could spark a
nationalist backlash. No country would have a monopoly in this sector and this should
assuage domestic negative reaction.
Q4. Will this concern the United States?
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ANSWER: The United States is already committed to assisting Vietnam in order to

diversify U.S. access to rare earths. The U.S. will accept that it must compete with
China in order to invest in developing Vietnam’s rare earths. The U.S. objective is not
to establish a monopoly but reliable access to meet its needs. The U.S. has already put
restrictions in place on importing rare earths from countries where Chinese ownership
is substantial.
Q5. Vietnam has not accepted many BRI projects (the Hanoi Metro is the main one).
Why the change?
ANSWER: Vietnam has given pro forma support to Xi Jinping’s Belt and Road Initiative
(BRI). In practice. Vietnam is being consistent with its policy of linking China’s BRI to
its Two Corridors One Belt scheme. China is Vietnam’s largest trading partner.
Improvement in cross border infrastructure will benefit Vietnam by lowering
transaction costs. In other words, this in an incremental step forward and not a major
shift towards China.
Q6. Will this impact tensions in the South China Sea? And could tensions in the South
China Sea derail this project?
ANSWER: The South China Sea dispute is the main irritant in relations between China
and Vietnam. The two sides manage this issue separately from the range of issues
involved in their bilateral relations. For example, the Xi-Trong Joint Statement issued
on 31 October 2022 stated, “The two sides need to maintain peace and tranquility on
the land border and peace and stability at sea, so as not to let maritime issues affect
the overall development of bilateral relations.”
At the moment, the situation in the waters near Vanguard Bank are in a holding
pattern. Data from 2022 reveals that China’s Coast Guard maintained a presence in
Vietnam’s Exclusive Economic Zone in the waters surrounding Vanguard Bank for 310
days that year. This is unlikely to change. Vietnam tightly controls media coverage
while monitoring Chinese activities.
This issue is complicated by the involvement of Russian oil companies Gazprom and
Zarubezhneft in the Vanguard Bank area.

Suggested citation: Carlyle A. Thayer, “Will Vietnam and China Upgrade the Railway
Linking Kunming and Hai Phong?” Thayer Consultancy Background Brief, December 7,
2023. All background briefs are posted on Scribd.com (search for Thayer.. To remove
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Thayer Consultancy provides political analysis of current regional security issues and
other research support to selected clients. Thayer Consultancy was officially
registered as a small business in Australia in 2002.