By Alvin Cheng-Hin Lim

On June 29, 2015, Vietnam joined the other founding members of China’s Asian Infrastructure Investment Bank (AIIB) in signing the bank’s articles of agreement.1 This was a significant milestone in Sino-Vietnamese relations as the AIIB is one of the international financial institutions (IFIs) established by China to help its partners finance infrastructure megaprojects to be constructed under the “Belt and Road” development framework.2 The “Belt and Road” in turn is intended to be a key engine of growth for China’s transition from its old normal of double-digit to a “new normal” of single-digit growth.3 Nguyen Van Binh, the governor of the State Bank of Vietnam, noted that Vietnam needs access to significant amounts of financing for its infrastructure construction needs, and that funding from traditional IFIs like the World Bank and the Asian Development Bank (ADB) is expected be reduced with Vietnam’s transition from low-income to middle-income status. Given this funding gap, the AIIB represents an important new source of financing for Vietnam’s future growth.4

Vietnam’s founding membership in the AIIB is not its sole mode of involvement in China’s “Belt and Road,” however. For the moment, the key “Belt and Road” project in Vietnam is in the energy sector, where a Chinese consortium has started work on the 1,200 megawatt Vinh Tan 1 coal-fired power plant in Binh Thuan province. The plant, which will cost an estimated 1.75 billion USD, is expected to begin operations in 2019.5 On a smaller scale, Chinese companies like cement manufacturer Anhui Conch are setting up factories in Vietnam and elsewhere under the “Belt and Road” program’s globalization drive.6 These factories join those that had been established in Vietnam by multinational corporations (MNCs) earlier during China’s transition to its new normal, when rising costs in China prompted those MNCs to modify their supply chains to the China+1 model, in which a relatively cheaper country like Vietnam replaced China in one of the stages of the manufacturing process.7 MNCs which established factories in Vietnam under the China+1 model include high-technology firms like Foxconn, Canon, and Samsung.8

Unlike Laos, which is committed to the construction of a 7 billion USD high-speed rail line between Vientiane and Kunming, the capital of the Chinese province of Yunnan, Vietnam has not yet committed to any “Belt and Road” transportation infrastructure megaproject.9 On paper, Vietnam is involved with the Pan-Asian Railway megaproject, which after having been dormant for almost a decade, has recently been revived under the framework of the Silk Road Economic Belt. One of the proposed lines of the Pan-Asian Railway runs from Bangkok through Cambodia and Vietnam into China.10 However, the Vietnamese government has no plans to construct this high-speed rail line.

In 2010 the Vietnamese government rejected a separate Japanese proposal, supported by the ADB, for a high-speed rail line linking Hanoi with Ho Chi Minh City. At an estimated cost of 56 billion USD, this was considered too expensive, especially as this amounted to half the value of Vietnam’s GDP at the time. In September 2015 the government agreed to reopen a feasibility study of the North-South high-speed line, with 2030 as the proposed construction starting date. In the meantime, the government will spend 3.86 billion USD upgrading the North-South line to a higher speed of 80-90 km/h from the present speed of 50 km/h. Both this upgrade and the high-speed rail feasibility study are part of Vietnam’s larger 12.31 billion USD 5-year national rail development plan.11

Whether the North-South line will eventually be upgraded to a high-speed line, and if so, whether this high-speed line will be expanded to join the Pan-Asian Railway are questions that the Vietnamese government may consider in the longer-term future. There is also the question of whether Vietnam’s unhappy experience with the China Railway Sixth Group, which has suffered multiple delays and deadly accidents in its construction of an elevated railway line in Hanoi, could taint the Vietnamese government’s reception to future transportation infrastructure construction bids from Chinese firms.12

If Vietnam eventually decides against joining the Pan-Asian Railway because of the high cost of high-speed rail, China could instead be willing to propose a medium-speed Vietnamese segment of the Pan-Asian Railway. In the case of the proposed high-speed line linking Kunming with the northeast Thai city of Nong Khai, China unexpectedly decided in June 2015 against proceeding with the project and instead proposed to the Thai government a medium-speed line that would also allow for cargo transport.13 This would connect with a separate medium-speed rail line between Nong Khai and Bangkok, making the Bangkok-Kunming segment of the Pan-Asian Railway a medium-speed rather than a high-speed line.14 This also indicates that China would be willing, in the case of Indonesia, to submit a bid for a medium-speed rail line between Jakarta and Bandung after the Indonesian government recently decided against proceeding with a proposed high-speed rail line between those cities.15

A History of Confrontation

Relations between China and Vietnam can be traced back millennia to 111 BC when the proto-Vietnamese kingdom of Nan Yue was conquered by the growing empire of Han China. While elements of Chinese civilization took root in Vietnam, the Vietnamese themselves resisted Chinese rule, of which the rebellion in 40 AD by the Trung Sisters is the most famous instance.16 The Song dynasty acknowledged the independence of the Vietnamese after their defeat of the Chinese army in 981 AD. China and Vietnam eventually settled into an unequal tributary relationship, interrupted by a series of Mongol invasions in the 13th century, and a two-decade period of occupation in the 15th century by the Ming dynasty. The defeat of the Ming occupation army by the Vietnamese emperor Le Loi in 1426 prompted the Chinese to recognize Vietnamese independence, and this allowed the Vietnamese to pursue their own imperial ambitions in the territories of the neighboring Cham and Khmer peoples.17 The chauvinism the Vietnamese held towards the Cham and the Khmer, whom they regarded as barbarians, echoed the older chauvinism the Chinese held towards the Vietnamese, whom the Chinese considered to be a barbarian people who were brought to civilization only with their careful guidance.18

During the anti-colonial struggle and the Cold War, the original alliance between the Chinese and Vietnamese communists underwent a gradual transition. In the 1950s, both the communist parties of China and Vietnam were allied against the West, and bilateral relations were close, with China supplying up to 20 billion USD in aid to their Vietnamese comrades in their struggles against France and then the US. However, even at that early stage, Vietnamese communist leaders recognized China as a long-term threat to Vietnamese sovereignty. The relationship began its slow deterioration in the mid-1950s, and both countries eventually engaged in a border war in 1979. The deterioration in bilateral relations followed the Sino-Soviet split, with Beijing seeing Hanoi’s increasing cooperation with Moscow as a threat to Chinese interests. Sino-Vietnamese relations would remain hostile between 1979 and 1991 over the Cambodian crisis, with Hanoi viewing Beijing’s continued support of the ousted Khmer Rouge rebels in Cambodia as a threat to Vietnamese regional interests. Sino-Vietnamese relations would also be negatively impacted by Hanoi’s ill-treatment of its ethnic Chinese citizens, especially the mass expulsions of ethnic Chinese from Vietnam.19

Following the normalization of Sino-Vietnamese relations in 1991, a series of border disputes led to the return of bilateral tensions. To settle these disputes, the Chinese and Vietnamese governments established a series of dialogue mechanisms. These dialogue mechanisms range from high-level and ministerial dialogues, to dialogues at the governmental and expert levels. These have had varying levels of success. China and Vietnam signed a land border treaty in 1999, and spent the following decade jointly demarcating their land border. China and Vietnam have also had maritime disputes. While they did resolve their maritime dispute over the Gulf of Tonkin in 2000, their disputes over contested claims in the South China Sea, especially with regard to the Paracel and Spratly archipelagos, remain unresolved.20

In recent years, anti-China public demonstrations in Vietnam have been organized to protest Chinese actions in the South China Sea. These include large demonstrations in Hanoi and Ho Chi Minh City in 2011 over alleged Chinese naval harassment of a Vietnamese oil exploration expedition, and demonstrations and riots in 2014 over the Chinese deployment of an oil rig in the disputed Paracel archipelago.21 The Vietnamese government has occasionally resorted to tit-for-tat responses to Chinese actions in the South China Sea.

In 2013 Vietnam was angered by China’s launch of a tourist cruise tour of the Paracel archipelago, and it retaliated in 2015 by launching a “sovereignty cruise” tour of the Spratly islands, angering China.22 Vietnam has also adopted a tit-for-tat response to China’s land reclamation works in the South China Sea, by reclaiming land and constructing buildings at West London Reef and Sand Cay in the Spratly archipelago.23 Of the rival claimants to the Spratly archipelago, it is Vietnam that has established the greatest number of outposts on the disputed islands: 48 as of May 2015, with China and the Philippines each having 8, Malaysia 5, and Taiwan, 1.24 This could complicate efforts by Vietnam to establish an anti-China alliance with the Philippines, which has its own claims to the Spratly islands.25

Fear of Encirclement

The fear and suspicion of China that occasionally emerges in Sino-Vietnamese relations can be traced to Vietnam’s sense of Chinese encirclement: its northern border is with the Chinese provinces of Yunnan and Guangxi, and its western border is with Laos and Cambodia, both of which have close ties with China.26 And on Vietnam’s east, as we have just seen, the South China Sea is a key zone of territorial contestation with China. To avoid domination by China, the Vietnamese government has actively pursued relations with other powers including the US, the EU, India, Japan, and Russia. The Vietnamese government has also actively sought to reduce Vietnam’s economic dependence on China.27

In addition, Vietnam has sought engagement with multilateral forums like ASEAN in order to weaken China’s influence. However, multilateralism has not always worked to Vietnam’s satisfaction. Cambodia, for example, has in recent years acted on behalf of China in the ASEAN multilateral framework.28 In the ADB’s Greater Mekong Subregion (GMS) multilateral forum, of which both China and Vietnam are members, GMS projects have improved connectivity between northern Vietnam and the Chinese provinces of Yunnan and Guangxi, resulting in tighter Sino-Vietnamese economic integration. While the Vietnamese government welcomes the economic development of the northern border region, the increased economic linkages with China have raised fears of economic dependency.29

In the case of hydropower, the GMS has failed to resolve a long-simmering conflict between China and the downstream Mekong nations—including Vietnam—over Chinese dam-construction in the Upper Mekong.30 Vietnam and the other downstream Mekong nations are concerned about the likely negative effects to the environment and their riverine fisheries of China’s planned construction of almost 30 dams, as well as Laos’ planned construction—with Chinese support—of up to 70 dams, in their respective stretches of the Mekong.31 This unfolding issue can be anticipated to remain one of the key sources of tension in Sino-Vietnamese relations in the years ahead.

References:

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Brunnstrom, David and Blanchard, Ben. “Images show Vietnam South China Sea reclamation, China defends own.” Reuters, May 8, 2015. Accessed September 11, 2015. http://www.reuters.com/article/2015/05/08/us-southchinasea-vietnam-idUSKBN0NT04820150508.

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Khoo, Nicholas. Collateral Damage: Sino-Soviet Rivalry and the Termination of the Sino-Vietnamese Alliance. New York: Columbia University Press, 2011.

Kwok, Kristine. “China derails plan for high speed railway through Thailand opting for slower option.” South China Morning Post, June 26, 2015. Accessed September 11, 2015. http://www.scmp.com/news/china/society/article/1826660/china-derails-plan-high-speed-railway-through-thailand-opting.

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Lim, Alvin Cheng-Hin. Cambodia and the Politics of Aesthetics. New York: Routledge, 2013.

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Lim, Alvin Cheng-Hin. “Laos And The Silk Road Economic Belt.” Eurasia Review, July 30, 2015. Accessed September 15, 2015. http://www.eurasiareview.com/30072015-laos-and-the-silk-road-economic-belt-analysis/.

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Notes:

1 “China-led AIIB development bank holds signing ceremony,” BBC News, June 29, 2015, accessed September 15, 2015, http://www.bbc.com/news/world-asia-33307314.

2 Alvin Cheng-Hin Lim, “The US, China and the AIIB: From Zero-Sum Competition to Win-Win Cooperation?” Eurasia Review, April 19, 2015, accessed September 15, 2015, http://www.eurasiareview.com/19042015-the-us-china-and-the-aiib-from-zero-sum-competition-to-win-win-cooperation-analysis/.

3 Alvin Cheng-Hin Lim, “China’s Transition to the ‘New Normal’: Challenges and Opportunities,” Eurasia Review, April 2, 2015, accessed September 15, 2015, http://www.eurasiareview.com/02042015-chinas-transition-to-the-new-normal-challenges-and-opportunities-analysis/.

4 “Vietnam signs AIIB agreement in Beijing,” VNA, June 30, 2015, accessed September 11, 2015, http://vietnam.vnanet.vn/english/vietnam-signs-aiib-agreement-in-beijing/190665.html.

5 “Vinh Tan 1 coal-fired power plant gets off ground,” The Saigon Times, July 20, 2015, accessed September 15, 2015, http://english.thesaigontimes.vn/42032/Vinh-Tan-1-coal-fired-power-plant-gets-off-ground.html. “‘One belt, one road’ initiative to further promote China-Vietnam co-op,” Xinhua, July 19, 2015, accessed September 15, 2015, http://www.chinadaily.com.cn/world/2015-07/19/content_21322569.htm.

6 Brenda Goh and Koh Gui Qing, “China’s ‘One Belt, One Road’ looks to take construction binge offshore,” Reuters, September 6, 2015, accessed September 15, 2015, http://uk.reuters.com/article/2015/09/06/uk-china-economy-silkroad-idUKKCN0R60X820150906.

7 Stuart Witchell and Philippa Symington, “China Plus One,” FTI Journal, February 2013, accessed September 15, 2015, http://ftijournal.com/article/china-plus-one.

8 Bill Hayton, Vietnam: Rising Dragon (New Haven: Yale University Press, 2010), 11-12.

9 Alvin Cheng-Hin Lim, “Laos and the Silk Road Economic Belt,” Eurasia Review, July 30, 2015, accessed September 15, 2015, http://www.eurasiareview.com/30072015-laos-and-the-silk-road-economic-belt-analysis/.

10 “Construction of Pan-Asian railway in SE Asia restarts due to China’s Silk Road initiative,” China Daily Mail, April 28, 2015, accessed September 11, 2015, http://chinadailymail.com/2015/04/28/construction-of-pan-asian-railway-in-se-asia-restarts-due-to-chinas-silk-road-initiative/. “Trans-Asian railways getting a boost with ‘One Belt One Road’ initiative,” CCTV.com, April 17, 2015, accessed September 11, 2015, http://english.cntv.cn/2015/04/17/VIDE1429260480224362.shtml.

11 Arno Maierbrugger, “Vietnam Revamps High-Speed Train Project,” Investvine, August 23, 2012, accessed September 11, 2015, http://investvine.com/vietnam-revamps-high-speed-train-project/. “Vietnam needs over $3.86 billion to upgrade north-south railway: report,” Thanh Nien News, September 5, 2015, accessed September 11, 2015, http://www.thanhniennews.com/society/vietnam-needs-over-386-billion-to-upgrade-northsouth-railway-report-51026.html.

12 “Vietnam Official Scolds Chinese Firm After Construction Accidents,” VOA, January 8, 2015, accessed September 11, 2015, http://www.voanews.com/content/vietnam-official-scolds-chinese-firm-deadly-accidents/2590854.html. Mai Ha, “Hanoi’s infamous elevated railway lags behind schedule, again,” Thanh Nien News, July 9, 2015, accessed September 11, 2015, http://www.thanhniennews.com/society/hanois-infamous-elevated-railway-lags-behind-schedule-again-47724.html.

13 Kristine Kwok, “China derails plan for high speed railway through Thailand opting for slower option,” South China Morning Post, June 26, 2015, accessed September 11, 2015, http://www.scmp.com/news/china/society/article/1826660/china-derails-plan-high-speed-railway-through-thailand-opting.

14 “Work on Thailand-China railway could begin by end of year,” Want China Times, September 15, 2015, accessed September 15, 2015, http://www.wantchinatimes.com/news-subclass-cnt.aspx?id=20150915000023&cid=1101&MainCatID=0.

15 Adam Minter, “Indonesia Refuses to Be Railroaded Into Debt,” Bloomberg, September 8, 2015, accessed September 11, 2015, http://www.bloombergview.com/articles/2015-09-08/indonesia-refuses-to-be-railroaded-into-debt.

16 Brantly Womack, China and Vietnam: the Politics of Asymmetry (Cambridge: Cambridge University Press, 2006), 98-102.

17 Womack, China and Vietnam, 120-137.

18 Alvin Cheng-Hin Lim, Cambodia and the Politics of Aesthetics (New York: Routledge, 2013), 60-61.

19 Hayton, Vietnam, 161, 189. Nicholas Khoo, Collateral Damage: Sino-Soviet Rivalry and the Termination of the Sino-Vietnamese Alliance (New York: Columbia University Press, 2011), 1, 111-120. Xiaoming Zhang, Deng Xiaoping’s Long War: The Military Conflict between China and Vietnam, 1979-1991 (Chapel Hill: University of North Carolina Press, 2015), 16-20.

20 Li Jianwei, Managing Tensions in the South China Sea: Comparing the China-Philippines and the China-Vietnam Approaches, RSIS Working Paper No. 273 (Singapore: S. Rajaratnam School of International Studies, Nanyang Technological University, 2014), 6-7, 15.

21 Nga Pham, “Vietnam’s anger over China maritime moves,” BBC News, June 6, 2011, accessed September 15, 2015, http://www.bbc.com/news/world-asia-pacific-13664408. “China moves Vietnam row oil rig,” BBC News, July 16, 2014, accessed September 15, 2015, http://www.bbc.com/news/world-asia-28322355. Katherine Tseng Hui-Yi, The China-Vietnam Clashes in the South China Sea: An Assessment, EAI Background Brief No. 928 (Singapore: East Asian Institute, National University of Singapore, 2014), i.

22 “Chinese tourists sail to Paracels Islands despite Vietnam protest,” Thanh Nien News, April 27, 2013, accessed September 11, 2015, http://www.thanhniennews.com/politics/chinese-tourists-sail-to-paracels-islands-despite-vietnam-protest-2674.html. Martin Petty, “Vietnam launches special ‘sovereignty’ cruise, angering China,” Reuters, June 5, 2015, accessed September 11, 2015, http://www.reuters.com/article/2015/06/05/us-vietnam-southchinasea-idUSKBN0OK22220150605.

23 David Brunnstrom and Ben Blanchard, “Images show Vietnam South China Sea reclamation, China defends own,” Reuters, May 8, 2015, accessed September 11, 2015, http://www.reuters.com/article/2015/05/08/us-southchinasea-vietnam-idUSKBN0NT04820150508.

24 John Boudreau and Diep Pham, “Vietnam Opens Spratlys to Tourism Amid Sea Dispute With China,” Bloomberg, June 4, 2015, accessed September 11, 2015, http://www.bloomberg.com/news/articles/2015-06-04/vietnam-opens-spratlys-to-tourism-amid-sea-dispute-with-china.

25 “Philippines and Vietnam to be ‘strategic partners,’” The Straits Times, September 4, 2015, accessed September 11, 2015, http://www.straitstimes.com/asia/philippines-and-vietnam-to-be-strategic-partners.

26 Lim, “Laos.” Alvin Cheng-Hin Lim, “Sino-Cambodian Relations: Recent Economic and Military Cooperation,” Eurasia Review, June 30, 2015, accessed September 15, 2015, http://www.eurasiareview.com/30062015-sino-cambodian-relations-recent-economic-and-military-cooperation-analysis/.

27 Hayton, Vietnam, 200. Katherine Tseng Hui-Yi, Vietnam’s Domestic Politics and South China Sea Policy, EAI Background Brief No. 1026 (Singapore: East Asian Institute, National University of Singapore, 2015), i.

28 Lim, “Sino-Cambodian Relations.”

29 Oliver Hensengerth, Regionalism in China-Vietnam Relations: Institution-building in the Greater Mekong Subregion (New York: Routledge, 2010), 147.

30 Hensengerth, Regionalism, 151.

31 Lim, “Laos.” “Mekong/Lancang River,” International Rivers, accessed September 15, 2015, http://www.internationalrivers.org/campaigns/mekong-lancang-river.