Author: Samuel Ku, Sun Yat-sen University

The recently signed Joint General Scheme of Mohan–Boten Economic Cooperation Zone is the first cross-border economic cooperation zone that China has established in Laos and, for that matter, in the whole of Southeast Asia. The deal hints at the Asian giant’s goal to expand its economic ties with its southern neighbours.

Boten, a remote village on the China–Laos border, is positioned at a strategic location for China to extend its influence in Southeast Asia, as it connects two important transportation lines from China to mainland Southeast Asia. One is the Kunming–Bangkok Expressway, which starts in Kunming, the capital of China’s Yunnan Province, passes through Boten, then over the Thai–Lao Friendship Bridge, and finally arrives in Bangkok.

The other line is the China–Lao Railway, which runs from Kunming to Vientiane, a strategic location along the East–West Corridor that connects Vietnam’s Danang with Phitsanulok in central Thailand and Mawlamyine in Myanmar. While the Kunming–Bangkok Expressway was completed in December 2013, construction of the disputed China–Lao Railway project, possibly causing severe environmental problems in northern Laos, only began in December 2015.

The Mohan–Boten Economic Cooperation Zone is not all that new. In 2007, a predecessor for the Mohan–Boren Economic Cooperation Zone — the Boten Special Economic Zone (BSEZ) — transformed Boten. The BSEZ was mostly funded by Chinese enterprises. Since the establishment of the BSEZ, fancy hotels, casinos, restaurants and shopping markets have appeared in the remote and undeveloped Boten.

Thanks to Laos’ free entry visa policy and the completion of the Kunming–Mohan Expressway — part of the Kunming–Bangkok Expressway — in late 2006, Chinese tourists and gangsters have been inundating the BSEZ. Chinese citizens are the majority of Boten’s customers and many local people have since been relocated to a nearby village to continue their traditional farming lifestyles.

But the BSEZ was closed in 2009 due to escalating criminal activities in the area. A local small shop owner said in an interview with the author in September 2014 that ‘Boten was like a ghost town because all the fancy hotels, casinos, and restaurants were completely shut down, leaving only a few small shops to survive’.

Interestingly, the tri-lingual signs — in Chinese, English and Laotian — are still there. And, while business is low in Boten at the moment, this remote village can easily be revived once the new Mohan–Boten Economic Cooperation Zone is opened.

Midway from Boten to Luang Prabang, Chinese influence is also very apparent in Muang Xay, the capital of the Oudomxay Province. Hotel Sheng Chang, established in early 2014, is the largest activity centre in Muang Xay and includes a big supermarket, a casino and a restaurant. When asked about the reason for such a large investment in a mountainous city with less than 150,000 residents, the hotel manager said that he sees it as a promising business venture. This is not only because of the Kunming–Mohan Expressway, but also due to rising Chinese economic activity in Laos.

The business district in Muang Xay is only a one-kilometre stretch along the main road, but Chinese shops and advertisements fully span both sides of the road. One can find small and middle-sized Chinese auto repair shops, grocery stores, hardware stores, computer shops, guest houses, and, of course, restaurants. Khmu used to be the largest ethnic group in Muang Xay, but now new Chinese migrants dominate the local economy, marginalising the Khmu people.

Even at the Muang Xay bus station Chinese influence is visible, with destination signs written in Chinese, English and Laotian. While it is common to see Chinese characters on signs in big cities like Luang Prabang, it is surprising to see Chinese characters in small towns such as Phongsaly, Muang La, Nong Khiaw and Luang Namtha.

Given the recent Chinese developments in northern Laos, it seems that the primary aim of the Mohan–Boten Economic Cooperation Zone is not to ‘promote the proposal of One Belt One Road jointly’ nor to ‘enhance the level of the bilateral reciprocal cooperation’, as stated by Chinese officials, but, rather, to facilitate further Chinese expansion into Laos and other parts of Southeast Asia.

Samuel Ku is Professor and Director of the Institute of China and Asia-Pacific Studies, Sun Yat-sen University.