Lancang-mekong Cooperation and the New International Land-sea Trade Corridor: Basis and Paths of Their Synergy

Though faced with challenges such as differences in strategic interests, interference from extraterritorial powers, underdevelopment of cross-border infrastructure, and insufficiency of customs efficiency and integration, the New International Landsea Trade Corridor, as part of the Belt and Road construction linking western China with ASEAN countries, holds out a great prospect for a synergy with the Lancang-mekong Cooperation.

The New International Land-sea Trade Corridor (ILSTC), launched under the Belt and Road Initiative (BRI), is a trade and logistics passage that promotes the connectivity and cooperation between China’s western region and ASEAN countries, and synergizes the BRI’S two components of the Silk Road Economic Belt and the 21st Century Maritime Silk Road.1 At the third Lancang-mekong Cooperation (LMC) Leaders’ Meeting in August 2020, Chinese Premier Li Keqiang proposed the synergy between LMC and the ILSTC,2 which would further expand trade and cooperation on connectivity and promote coordinated development. The signing of a co-chairs’ statement on cooperation of

Wang Rui is Associate Professor at the Institute for Sustainable Development and the School of Public Affairs, Chongqing University.

1 During Chinese President Xi Jinping’s state visit to Singapore in November 2015, the two countries decided to set up the China-singapore (Chongqing) Demonstration Project on Strategic Connectivity, as the third inter-governmental cooperation project. In August 2017, China’s Chongqing Municipality, Guangxi Zhuang Autonomous Region and Gansu Province signed a framework agreement on jointly building the China-singapore Southern Transport Corridor. During Chinese Premier Li Keqiang’s visit to Singapore in November 2018, the Memorandum of Understanding on the New International Land-sea Trade Corridor under the China-singapore (Chongqing) Demonstration Initiative on Strategic Connectivity (CCI-ILSTC) was signed. The CCI-ILSTC was later put into action when eight provinces in western China, including Chongqing and Yunnan, signed an agreement on promoting its construction.

2 Currently, the ILSTC is also termed “Western New International Land-sea Trade Corridor” in some contexts. The term “New International Land-sea Trade Corridor” is adopted under the China-singapore (Chongqing) Demonstration Project on Strategic Connectivity, focusing on all-encompassing external cooperation under the Belt and Road Initiative, with an emphasis on its open nature and economic functions. The name “Western New International Land-sea Trade Corridor” is mostly used in the planning of China’s National Development and Reform Commission, with an eye on addressing outstanding issues in coordinated regional development and a new round of large-scale development of China’s western region. The stress is put on domestic connectivity of transport and logistics infrastructure. Despite the slight difference in name, the two refer to the same thing. The launch of Chongqing-guizhou-guangxi-singapore rail-sea intermodal transport in September 2017 marked the opening of the ILSTC

synergizing LMC and the ILSTC at this meeting has offered an important channel for countries in the region to enhance the depth and quality of their pragmatic cooperation in the process of creating a Lancang-mekong community with a shared future. Amid the ever-growing economic and political uncertainties in the world today, Mainland Southeast Asia has taken on a more important role in China’s neighborhood and global strategic layout, which makes the LMC-ILSTC synergy even more significant. It is necessary for all sides to innovate in their approach to cooperation, jointly address the new challenges brought about by the changing international environment, and enrich the content of Lancangmekong cooperation.

Significance of LMC-ILSTC Synergy

It is an important strategic consensus of the Lancang-mekong countries under the “3+5+X” cooperation framework3 to promote high-quality and sustainable economic development. Originating from the Chinasingapore (Chongqing) Demonstration Project on Strategic Connectivity, an inter-governmental cooperation project between the two countries, the New International Land-sea Trade Corridor connects the “dual hubs” of Chongqing and Singapore, and adopts organizational patterns of logistics such as international rail-sea intermodal transport, crossborder road transport, and international railway interline transport. To its north, it is linked with the Silk Road Economic Belt through the Chinaeurope railway freight express that passes by China’s several western provinces. To its south, it connects the 21st Century Maritime Silk Road and the Southeast Asian mainland. As a land-sea artery, it runs through China’s northwestern and southwestern regions, and links western China 3 The “3+5+X” mechanism of cooperation refers to the three cooperation pillars of political and security issues, economic and sustainable development, and cultural and people-to-people exchanges; the five key priority areas of connectivity, production capacity, cross-border economic cooperation, water resources, and agriculture and poverty reduction; as well as cooperation in broader areas such as the digital economy, environmental protection, customs and youth.

with the ASEAN countries, while being supplemented by a network of branch lines that expands its outreach. Promoted by the China-singapore connectivity project, the ILSTC has already been in regular, large-scale, and institutionalized operation. The LMC-ILSTC synergy will enhance trade ties in the Lancang-mekong region, accelerate the regional integration process, improve the quality and performance of economies across the region, and turn the vision of Lancang-mekong economic development belt into reality.

Enriching the content of Lancang-mekong cooperation

As the most vibrant part of CHINA-ASEAN relations, LMC symbolizes a major step further for cooperation between China and the Mekong countries.4 Since its launch in 2016, LMC has received a positive response and broad support from a wide range of parties, becoming one of the most dynamic and productive mechanisms in the region.5 As LMC evolves from the stage of rapid expansion to that of all-round development, it will effectively transform the ILSTC from point-to-point cooperation between Chongqing and Singapore to group-to-group cooperation between China’s western region and the Mekong countries. The existing LMC basis and achievements in cooperation will serve as the foundation for the Mekong countries’ participation in the ILSTC.

The LMC-ILSTC synergy will facilitate in-depth integration of production networks and productive factors. By further unleashing the gravitational effect of China’s economic development on the Mekong countries, the “trading distance” between western China and the Mekong countries will be shortened. The synergy pattern of developing regional logistics chain to catalyze the complementarity and realignment of industrial, supply and value chains will boost the organic integration of regional 4 Liu Qing, “Progress and Future Development of Lancang-mekong Cooperation,” International Studies,

No.2, 2018, p.46.

5 “Li Keqiang Attends the 2nd LMC Leaders’ Meeting,” Ministry of Foreign Affairs of China, January 11, 2018, https://www.fmprc.gov.cn/mfa_eng/topics_665678/lkqcxlmhzdecldrhybfwjpz/t1525244.shtml.

production networks, strengthen internal connections between the networks in western China and the Mekong sub-region, facilitate the formation of a common market, and deepen economic and trade ties between the Mekong countries and the broader Southeast Asian countries.

A multi-dimensional and multi-functional corridor involving a diversity of trading patterns, the ILSTC has become the most convenient trade and transport passage linking western China with the Mekong countries. Not only does it make a Lancang-mekong economic development belt possible, it also expands the geographical coverage of LMC from China’s border provinces of Yunnan and Guangxi to the vast hinterlands. The rapid and smooth flows of agricultural products, plastics, and fossil fuels in the Mekong countries as well as manufactured equipment and electronic information products in China further boost the trade in intermediate goods and transform the division of labor between the two sides from a vertical model to a more hybrid model, featuring multi-level and diverse patterns in the division of labor across and within industries and even within specific product lines. Meanwhile, the LMC-ILSTC synergy will diversify the trade destinations for all the regional countries, and serve as a crucial external underpinning for the optimal allocation of resources worldwide and for sustained economic development.

Facilitating the connection of the Belt and the Road

The Lancang-mekong region is an important hub where the Silk Road Economic Belt and the 21st Century Maritime Silk Road come together. With the continuous expansion in spatial transport patterns, the overall freight transportation capacity, and consequently the trade efficiency of the countries involved, will significantly improve. This will give a tremendous boost to the ability of cross-regional collaboration and the quality of crossregional logistics. By giving full play to their combined advantages and effectiveness with regard to transport and logistics infrastructure, the interconnectivity of China and the Mekong region and that of the Belt and the Road will further enhance the organizational capability of China

and the Mekong countries for cross-regional transportation and optimize the structure of their trade network. Meanwhile, strengthened interactions within the China-mainland Southeast Asia economic corridor and the seamless connection of the Belt and the Road in the Lancang-mekong region will inject strong momentum into the construction of a Lancang-mekong economic belt. Moreover, the smooth integration of the ILSTC with the broader international logistics network, including the China-europe and China-central Asia railway freight express services, as well as the South Asian road-rail intermodal transport, will accelerate the formation of an international trade artery that not only links China and Southeast Asia, but also effectively connects the markets in Southeast Asia, South Asia, Central Asia and Europe.

Energizing the positive dynamics of regional relations

Currently, cooperation in the Mekong sub-region is faced with both a “congestion of mechanisms” and a “dilemma of cooperation.” In response, the LMC-ILSTC synergy serves as new public goods for the region that will create additional benefits and a new economic growth space with its landsea and cross-regional combined effects. The synergy will also consolidate the institutional outcomes of LMC, and reinforce the BRI’S strategic and conceptual alignment with the development plans of different Mekong countries, while clarifying the vision, roadmap and implementation approach of the Lancang-mekong Economic Development Belt.

Based on its principle of wide consultation, joint contribution and mutual benefits, China’s role in the provision of international public goods has turned from one of a mere provider to one of facilitating joint participation. The convergence in the strategic perceptions of different parties and the expansion of their common interests will deepen cooperation between China and the Mekong countries under the BRI framework with effects spilling over from economic and trade connectivity to other areas such as science, education, culture and health. China’s neighborhood diplomacy will also gain fresh momentum with enhanced political exchanges and

strategic mutual trust between the two sides. The building of an ASEAN community is also expected to advance at an accelerated pace, and will create a new model for regional cooperation.

Basis of LMC-ILSTC Synergy

As Lancang-mekong Cooperation demonstrates its vitality with more positive outcomes, regional cooperation has been elevated to a higher level. The construction of the New International Land-sea Trade Corridor has also entered a crucial stage of all-round expansion and in-depth implementation. With the advance of the Lancang-mekong economic belt, the quality and performance of economies across the region has witnessed substantial improvement. The conditions are ripe for their synergy in terms of transport connectivity, trade facilitation, economic cooperation, and mechanism building.

Steady progress of multilateral and bilateral relations

With the determination to build friendship and partnership with neighbors and pursue a policy of bringing harmony, security and prosperity to its neighbors, China has been practicing the concept of amity, sincerity, mutual benefit and inclusiveness in its neighborhood diplomacy and is continuously developing friendly relations with the Mekong countries. Through the Belt and Road Initiative, the two sides have established a closer comprehensive strategic partnership with better alignment of their development strategies. Under the framework of the CHINA-ASEAN Strategic Partnership Vision 2030, China has been stepping up strategic communication with neighboring countries through multiple mechanisms such as the Greater Mekong Subregion Economic Cooperation Program (GMS) and the ASEAN Mekong Basin Development Cooperation (AMBDC), as well as through multilateral dialogue platforms like “10+1” and “10+3.”

The current world landscape is witnessing a profound transformation as well as growing uncertainty and instability. Unilateralism and hegemonism are on the rise, while the multilateral international order and global governance system are under serious attack. Despite all this, the cooperation between China and the Mekong countries has been consolidated and even deepened. In particular, the Mekong countries extended firm support to China as soon as the COVID-19 pandemic erupted, a sign of solidarity among Lancang-mekong countries in a community with a shared future.

Maturing of transport network

Relying on the existing infrastructure, a multi-dimensional transport network between China and the Mekong countries has begun to take shape.6 Through the ILSTC, logistics patterns such as international railsea intermodal transport, cross-border road transport and international 6 Lin Wenxun and Zheng Yongnian, New Opportunity for Lancang-mekong Cooperation and New Chapter for CHINA-ASEAN Relations, Social Sciences Academic Press, 2017, p.216.

railway interline transport can complement and coordinate each other, thus providing an operational structure that will serve multiple functions. The rail-sea intermodal transport starts from China’s western provinces, and connects the ports of Vietnam, Thailand and Cambodia through Qinzhou and other ports of the Beibu Gulf in China’s Guangxi Zhuang Autonomous Region. With road transport playing a major role, supplemented by roadrail and road-sea intermodal transport, cross-border transportation of the ILSTC connects the different arteries in Vietnam, Laos and Myanmar.7 As for the international railway interline transport, three lines have been launched, based on existing trunk railways and using rail ports in Guangxi and Yunnan as entry and exit points.8 Furthermore, China, Myanmar, Thailand and Laos, as countries along the golden waterway of Lancangmekong River, have the common demand of dredging the upstream channel, maintaining and improving navigation conditions, and promoting trade and tourism.9

As a natural economic bond between China and the Mekong countries, the Lancang-mekong River has become a major corridor on which the two sides depend to deepen their economic and trade ties.10 To enhance Mekong interconnectivity, ASEAN has increased infrastructure investment in the region. Among the 19 infrastructure projects on the 2019 priority list under the Master Plan on ASEAN Connectivity 2025, 15 are located in the 7 So far, five transport lines have been in regular operation, including 1) Eastern Line: Nanpeng, Chongqing – Pingxiang or Longbang, Guangxi – Hanoi, Vietnam – Ho Chi Minh, Vietnam – Phnom Penh, Cambodia, with a length of 3,400 kilometers overland; 2) Second Eastern Line: Nanpeng, Chongqing – Qinzhou Port, Guangxi – Singapore, with a length of 4,300 kilometers through land-sea intermodal transport; 3) Middle Line: Nanpeng, Chongqing – Mohan, Yunnan – Vientiane, Laos – Bangkok, Thailand, with a length of 2,800 kilometers overland; 4) Western Line: Nanpeng, Chongqing – Ruili, Yunnan – Yangon, Myanmar, with a length of 2,700 kilometers overland; and 5) Asia-europe Line: Europe – Tuanjie Village, Chongqing – Nanpeng, Chongqing – Vietnam, with a length of 12,400 kilometers through road-rail intermodal transport. 8 The three lines are: 1) Eastern Line: Chongqing – Hekou, Yunan / Pingxiang, Guangxi – Hanoi / Hai Phong, Vietnam; 2) Middle Line: Chongqing – Mohan, Yunnan – Vientiane, Laos – Bangkok, Thailand; 3) Western Line, which is still under planning: Chongqing – Ruili, Yunnan – Kyaukpyu, Myanmar / Bangkok, Thailand.

9 Tu Su and Hu Dekun, “Lancang-mekong Cooperation on Water Resources: Challenges and Approaches,” International Studies, No.3, 2016, p.55.

10 Li Zhang, “Trust Crisis and Building Trust in Transboundary Water Cooperation along the Lancangmekong River,” Water and Power, December 2018, pp.235-251.

Mekong region.11

In-depth development of economic and trade ties

China has become the largest trading partner of Myanmar, Thailand, Cambodia and Vietnam. The trade volume between China’s western provinces and the Mekong countries reached US$56.55 billion in 2018, accounting for 70.8 percent of these provinces’ trade with ASEAN countries.12 In particular, the trade volume of Yunnan and Guangxi with the Mekong countries reached US$12.88 billion and US$28.05 billion, accounting for 22.8 percent and 49.6 percent respectively of total trade between Chinese western provinces and the Mekong sub-region. Myanmar and Vietnam are Yunnan’s top two trading partners, while Vietnam is also the largest trading partner of Guangxi. In 2019, ASEAN became the largest and second largest trading partner of Chongqing and Sichuan respectively. The two provincial-level administrative regions’ trade with the Mekong countries took a share of 48.4 percent and 59.9 percent respectively in their trade with all ASEAN countries. In the same year, the total trade volume between China and the Mekong countries reached US$286.16 billion, which was 44.6 percent of CHINA-ASEAN trade.

After the outbreak of COVID-19, ASEAN historically became the top trading partner of China in the first quarter of 2020, with trade volume between the two sides reaching 991.34 billion yuan. Among these, trade with the Mekong countries represented 45 percent.13

In the area of investment, China became the largest investor in Cambodia, Laos, Myanmar and Thailand in 2017-2019. Conversely, the investment of the Mekong countries in China also increased from US$54 million in 2015 to US$195 million in 2018.14 11 “ASEAN Identifies 15 Priority Projects in Mekong Countries,” Greater Mekong Subregion, June 21, 2019, https://www.greatermekong.org/asean-identifies-15-priority-projects-mekong-countries.

12 Due to inconsistent accessibility to relevant data, in this article the statistics of trade between China’s Chongqing, Guangxi, Yunnan, Guizhou, Shaanxi, Gansu, Xinjiang, Sichuan, Inner Mongolia, Qinghai and Southeast Asian countries are considered. The data comes from statistical yearbooks of China and respective provinces.

13 Based on statistics from China’s General Administration of Customs.

14 See China’s Statistical Yearbooks in 2016 and 2019.

Substantial facilitation of customs clearance

Based on the Cross-border Transport Agreement (CBTA), the Mekong countries have established the Strategic Framework for Action on Trade Facilitation and Investment in the Greater Mekong Sub-region (SFATFI). Since the launch of LMC and the inauguration of the ILSTC, the relevant parties have closely cooperated on customs integration, standards harmonization, and compatibility of port facilities, and the construction of “single window” and “smart port” in international trade has been successively kick-started.15 The joint working group of LMC cross-border economic cooperation, established in 2017, discusses regional trade facilitation and other issues on a regular basis. Released in 2018, the Five-year Plan of Action on Lancang-mekong Cooperation (2018-2022) proposed “facilitation of visa application, customs clearance and transportation, and discussion on implementing the ‘single window’ model for cross-border clearance.”16 In June 2019, China set up free trade experimental zones in Guangxi and Yunnan, in a bid to enhance clearance capability and cross-regional clearance coordination with Vietnam and Laos.

In terms of standards harmonization, the ASEAN Mutual Recognition Arrangements (MRAS) for conformity assessment activities, to which the Mekong countries are all signatories, cover multiple areas including electronics, communications, medicine, prepared food and automobiles,17 which has guaranteed inter-state cooperation in health quarantine and food inspection. To enhance cross-customs clearance service capabilities, the customs authorities of Chongqing, Qinghai and Yunnan signed a 15 The Mekong countries have participated in the ASEAN Single Window (ASW) initiative. Myanmar announced the Myanmar Automated Cargo Clearance System (MACCS) and the Myanmar Customs Intelligent Database System (MCIS) in 2016 in place of previous systems. In 2020, the systems were put into use in Muse, the largest border port between China and Myanmar.

16 “Five-year Plan of Action on Lancang-mekong Cooperation (2018-2022),” State Council of the People’s Republic of China, January 11, 2018, http://english.www.gov.cn/news/international_exchanges/2018/01/11/ content_281476009777104.htm.

17 Li Hao, “CHINA-ASEAN (Cambodia, Laos, Myanmar, Vietnam) Trade Facilitation: A Perspective from Enterprises,” Journal of Guangxi University (Philosophy and Social Science), No.5, 2017.

memorandum of cooperation on jointly supporting ILSTC construction in China’s western region in October 2019, according to which all sides would organize pilot programs for international multi-modal transport and explore new rules for cross-border road and land-sea trade. With the Regional Comprehensive Economic Partnership (RCEP) agreement expected to take effect and the full implementation of the CHINA-ASEAN Free Trade Area Upgrading Protocol, all this will further increase the level of trade liberalization and customs facilitation.

Improvement of cooperation mechanisms

In terms of institutional design, the ILSTC is mainly driven by existing bilateral mechanisms under the China-singapore (Chongqing) Demonstration Initiative on Strategic Connectivity, and gives play to the role of Chongqing and Singapore as “dual hubs.” By motivating the participation of other Chinese western provinces and ASEAN countries, the ILSTC underlines institutional coordination at the international, domestic and inter-provincial levels, presenting both international and regional characteristics. So far, the ILSTC has established a framework of cooperation mechanisms under which the government plays the major role as the policymaking core. Involving the three functions of policy-making, coordination and implementation with appropriate division and cooperation among them, the framework aims to advance cross-regional coordination domestically and cross-border consultation and cooperation internationally.

In June 2018, principled consensus was reached at the second meeting of the joint working group of LMC cross-border economic cooperation on framework arrangements of the Five-year Development Plan for LMC Cross-border Economic Cooperation and the LMC Smart Trade Network Initiative, which opened a new chapter for cross-border economic ties among Lancang-mekong countries.18 At the fifth LMC Foreign Ministers’ Meeting

18 “The 2nd JWG-TIEC Meeting of Mekong-lancang Cooperation Held in Kunming,” Ministry of Commerce of China, June 22, 2018, http://english.mofcom.gov.cn/article/newsrelease/ significantnews/201806/20180602760617.shtml.

in February 2020, all sides explicitly agreed on connecting the vast market of China’s central and western region with the vibrant market of ASEAN by aligning the ILSTC construction with the Lancang-mekong Economic Development Belt,19 which has created opportunities for accelerating LMCILSTC synergy. So far, a framework of mechanisms has taken shape in LMC which features the leadership of the heads of state, all-encompassing areas of cooperation, and the participation of different sectors. It is operated on a project-to-project basis with guidance from the government and the engagement of multiple stakeholders. It is advanced through multi-level and multi-dimensional dialogues including leaders’ meetings, foreign ministers’ meetings, senior officials’ meetings and working group meetings in different areas.20 With the continuous improvement of cooperation mechanisms, the combined strength of relevant actors, frameworks, and fields of cooperation will further consolidate the foundation for LMC-ILSTC synergy.

Challenges for LMC-ILSTC Synergy

The synergy between LMC and the ILSTC is not only affected by the international and regional situation or the bilateral and multilateral relations that comprise it, it is also constrained by its own stage of development and its supporting hardware infrastructure and software mechanisms.

Uncertainties brought about by increasing diversity of interests

The LMC-ILSTC synergy is generally welcomed by the Mekong countries, all of whom aspire for more access by their participation to external resources and development opportunities.21 Due to their

19 “The Fifth Lancang-mekong Cooperation Foreign Ministers’ Meeting Was Held in Vientiane,” Ministry of Foreign Affairs of China, February 21, 2020, https://www.fmprc.gov.cn/mfa_eng/zxxx_662805/t1748375.shtml. 20 Lu Guangsheng and Luo Huilin, “Lancang-mekong Cooperation from Cultivating Period to Growth Period: New Points, Difficulties and Direction,” Journal of Boundary and Ocean Studies, No.2, 2018. 21 Most Mekong countries are in the initial stages of development or are undergoing transitions. According to World Bank statistics, apart from the upper-middle-income country of Thailand with a GDP per capita of US$7,273, the other Mekong states of Myanmar, Laos, Cambodia and Vietnam all fall into the category of lower-middle-income countries, with GDP per capita of US$1,326, $2,542, $1,510 and $2,566 respectively.

different locations within the Mekong River Basin,22 these countries have different objectives, priorities and interests regarding the development and conservation of water resources. While countries in the middle and upper reaches, like Laos, focus on hydropower development, downstream countries, like Cambodia and Vietnam, are more concerned about utilization of fishery resources and environmental protection. The environmental issues originating from the exploitation of Mekong water, and the management of water resources, are consistent points of contention among the countries.

At the same time, the Mekong countries, all sharing the status of being developing countries, are in general highly dependent on external resources, which leads to competition among them.23 There are also asymmetries among them in terms of their development priorities, project choices, resource input, and technical standards.24 Laos focuses on industrial capacity cooperation and infrastructure connectivity in an effort to become a land hub connecting neighboring countries. Thailand is going all out to advance construction of its Eastern Economic Corridor, which straddles its three eastern provinces off the Gulf of Thailand and will support the country’s industrial transformation. Cambodia and Vietnam, on the other hand, are looking forward to more external investment and more exports.

With a variety of political factions and interest groups, as well as a diversity of religions and cultures, the Mekong region is home to ethnic conflict, conflict over democracy, and cross-border environmental or

22 The length of Mekong River segment in Laos is the longest (1,987 km) among the five Mekong countries, followed by that in Thailand (976 km), Cambodia (502 km), Myanmar (265 km), and Vietnam (230 km). The Mekong basin area in Laos is also the largest (21.5 km2) among the five countries, followed by that in Thailand (18.2 km2), Cambodia (16.1 km2), Vietnam (6.5 km2), and Myanmar (2.1 km2).

23 Shen Minghui, “Greater Mekong Subregion Economic Cooperation Program: Complicated Cooperation Mechanism and China’s Role,” Asia-pacific Economic Review, No.3, 2012, p.15.

24 Laos has put forward a strategy to transform itself from a land-locked to a land-linked economy. Vietnam has formulated the “Two Corridors and One Economic Circle” plan, involving the construction of economic corridors connecting itself with China and an economic circle around the Beibu Gulf (Gulf of Tonkin). Cambodia is implementing a new phase of its Rectangular Strategy for Growth, Employment, Equity and Efficiency. Thailand has officially launched “Thailand 4.0,” a national strategy designed to promote and support innovation, creativity, research and development, higher technologies and green technologies. And Myanmar is developing the East-west Economic Corridor connecting itself with India, China and Thailand, and the North-south Economic Corridor connecting Yangon and Myitkyina through Mandalay.

resource conflict.25 The separatist movement by the Khmer Krom people in Vietnam’s Mekong delta has undermined the country’s domestic stability. In Myanmar, the sluggish process of ethnic reconciliation, the issue of the Rohingya people in the Rakhine State, and the contradiction between the National League for Democracy and the military have resulted in partial conflicts and tensions in the country.26 The domestic politics of Thailand, under the strong influence of the military, has for a long time witnessed intense confrontation between the political parties that represent different regions and different social groups with diverse interests. Despite the holding of national elections as scheduled in 2019 and the country’s transition from the junta to a democracy, there have still been large-scale anti-government protests in Thailand, which adds much uncertainty to the domestic situation. The political volatility and partial conflicts in some of the Mekong countries will to some extent affect the LMC-ILSTC synergy, particularly in terms of connectivity and industrial capacity cooperation.

Moreover, the “congestion of mechanisms” has resulted in the adoption of a major-power balancing strategy by most Mekong countries. The presence of multiple bilateral and multilateral cooperation frameworks in the region has provided various alternatives for regional infrastructure construction and industrial capacity cooperation.

Complexity aggravated by US and Japanese interference

In the context of dramatic geopolitical changes and enduring tension in some regions, the LMC-ILSTC synergy is facing interference and even sabotage by external powers. With the introduction of the Indo-pacific strategy, the United States has interfered in Mekong regional affairs in a high-profile manner. Through the Lower Mekong Initiative (LMI) and the succeeding Us-mekong Partnership, plus other bilateral or multilateral

25 Mikio Oishi, “Introduction: Current Conflicts in Southeast Asia and Their Management in the Region’s Globalization,” Managing Conflicts in a Globalizing ASEAN, November 2019, pp.1-15.

26 Liu Zhi and Lu Guangsheng, Report on the Development of the Lancang-mekong Cooperation (2018), Social Sciences Academic Press, 2018, p.19.

mechanisms, the US has acted alone or in collusion with Japan and Australia to seek long-term influence in the region through an institutional approach. In August 2019, then US Secretary of State Mike Pompeo announced the dedication of US$14 million in assistance to the Mekong countries at the 12th LMI ministerial meeting, and launched the Japan-us Mekong Power Partnership (JUMPP) with Japan to help the Mekong countries secure their energy supplies. Recently, the US has also further intervened into South China Sea affairs in an attempt to sour regional countries’ relations with China and force ASEAN countries to take sides. By conducting socalled “Freedom of Navigation Operations” more frequently and broadly, and carrying out more military operations, the US intends to create tension and instability in the region. This may negatively affect the enthusiasm of countries like Vietnam in the ILSTC construction, and make the implementation of the LMC-ILSTC synergy more difficult.

As the largest donor country in the region, Japan considers the Mekong region crucial to the success of its “strategic diplomacy” and “value-oriented diplomacy.” It has continuously stepped up assistance to Cambodia, Laos, Myanmar and Vietnam.27 In recent years, more than 70 percent of Japan’s official development assistance to Southeast Asia has gone to the subregion.28 In addition, Japan has established the Mekongjapan summit meeting mechanism while playing a leading role in the Greater Mekong Subregion Economic Cooperation Program and the Cambodia-laos-vietnam Development Triangle Area. Even though Japan is conducting third-party market cooperation with China on Thailand’s Eastern Economic Corridor,29 the moves are essentially a strategy of Japan to reduce the United States’ economic influence in the Asia-pacific and

27 Keokam Kraisoraphong, “China, Japan, and the Greater Mekong Basin: A Southeast Asian Perspective,” China-japan Relations in the 21st Century, September 2017, pp.155-183.

28 “Japan, Mekong Countries Adopt 3-Year Cooperation Strategy,” Greater Mekong Subregion, October 10, 2018, https://www.greatermekong.org/japan-mekong-countries-adopt-3-year-cooperation-strategy.

29 At the first China-japan Third-party Market Cooperation Forum in October 2018, three enterprises from China, Japan and Thailand signed a memorandum of cooperation on accelerating smart-city development at the Amata Industrial Park in Chonburi, Thailand. Enterprises from the three countries will also cooperate on the construction of a high-speed rail project linking three major airports of Thailand.

retake the dominant role in the regional economy at a time when the “flying geese” model of Asian economic development is losing its appeal.30 Besides, the influence of India, South Korea and the European Union on the Mekong region, though in different forms, has also made the LMCILSTC synergy more difficult.31

Underdevelopment of cross-border transport and logistics infrastructure

So far, China and the Mekong countries have yet to introduce a clear roadmap for the development of a navigable Mekong waterway, as the shape of its construction planning is still awaiting clarification. The inability of the Mekong countries to decide on the breadth and depth of a navigable waterway has impeded the role of the Mekong to become a transport and logistics corridor.32 For the ILSTC, the cross-border channels in Vietnam and Myanmar fall far short of the diversity required for a transport network in the Lancang-mekong region. The problems of dead-end roads and traffic congestion are also still outstanding. For example, due to a financial shortage, the road conditions and supporting facilities of the Kunming-bangkok highway are far from satisfactory in Laos. In Myanmar, Cambodia and Laos, the lagging development of logistics has resulted in the underperformance of its alignment with the ILSTC.33 The delay in the construction of Dong Dang Port in Vietnam and Muse Port in Myanmar has slowed down their crossborder transport with China. Compared with traditional modes of transport, the ILSTC does reduce shipping time, but the extra transit process has made

30 Wang Jingchao, “China-japan Cooperation in Third-party Markets: Japan’s Strategic Thinking and Its Obstacles,” China International Studies, No.4, 2019, p.75.

31 India has put forward the Mekong–ganga Cooperation Initiative and the Mekong-india Economic Corridor. South Korea has launched the mechanism of Mekong-rok Foreign Ministers’ Meeting. The European Union has proposed bi-regional cooperation between the Danube and Mekong regions.

32 Lu Guangsheng, “Geo-politics and Geo-economics of Mekong Waterway: Plights and Ways Out,” Journal of Shenzhen University (Humanities & Social Sciences), No.1, 2017, p.141.

33 According to the World Bank Logistics Performance Index in 2018, the logistics performance of Myanmar, Cambodia and Laos ranked 137th, 98th and 82nd respectively among the 160 countries and regions surveyed.

freight transport less efficient.34

China’s planning for the ILSTC overseas infrastructure and logistics system is still in a nascent stage. Considering the security and stability of industrial and supply chains, a forward-looking perspective is lacking in China’s layout of its overseas collection/distribution stations and logistics bases along major railways such as the China-laos and Chinathailand railways. This is also the case in China’s arrangement of logistics parks, international distribution centers, overseas warehouses, and other cross-border logistics facilities in major hubs such as Hanoi and Ho Chi Minh City in Vietnam, Vientiane in Laos, Phnom Penh and Sihanouk in Cambodia, Bangkok in Thailand, and Yangon in Myanmar. At the same time, the inconsistency between the different modes of transport in terms of vehicle and document standards has made through-way transport unlikely in the short term. The organizing efficiency of transport along the corridor needs improvement.35 In addition, cross-border criminal activities such as narcotics trade, illegal immigration, smuggling, and illicit gambling are rampant in the border areas of the Mekong countries. These non-traditional security issues have posed major risks to the construction of cross-border transport and logistics facilities.

Capacity of industrial synergy and potential of the ILSTC yet to be tapped

Currently, the ILSTC has not yet produced the intended effect of industrial conglomeration. Its advantages as a corridor have yet to translate into competitiveness in trade and industrial development. The cooperation model based on supply and industrial chains and the operational model that combines logistics, trade and industries are in need of further exploration

34 Yonglei Jiang, Guanying Qiao and Jing Lu, “Impacts of the New International Land-sea Trade Corridor on the Freight Transport Structure in China, Central Asia, the ASEAN Countries and the EU,” Research in Transportation Business & Management, December 20, 2019, https://www.sciencedirect.com/science/ article/pii/s2210539519302263#s0075.

35 For example, China’s railways adopt the standard gauge of 1,435 mm, while the meter gauge of 1,000 mm is used in the railways of most other countries in the region.

and improvement. Moreover, the ILSTC’S effect is limited in boosting neighboring international distribution centers and trading markets. The expected role of the ILSTC in enhancing international industrial capacity cooperation, improving industrial organization, promoting industrial and trade collaboration and upgrading has yet to come into full play. The interand intra-regional economic resilience also needs further strengthening.

Since the ILSTC is still in the period of formation, its operation is faced with problems such as insufficient supply of goods, stubbornly high operational and logistics costs, lack of entities capable of operating multimodal transport, and inadequate brand awareness and recognition. In particular, the phenomena of goods supply shortage and export-import imbalance are prominent in some lines. In 2019, the value of goods traded by the ILSTC in Chongqing was approximately 10.1 billion yuan, accounting for only 2 percent of Chongqing’s total external trade and 9.3 percent of its trade with ASEAN countries in the same period. As of July 2019, there had been 1,460 highway shuttles serving cross-border road transport between Chongqing and ASEAN countries, with 1,353 on outward journeys and the remaining 107 on return trips.36

Insufficiency of customs efficiency and integration

Currently, the connection between different modes of transport at the logistics hubs of China and the Mekong countries is far from smooth. With a lack of coordination in organization and efficiency in collection and distribution, there is much room for improvement in the overall performance of domestic and overseas logistics facilities. The Pingxiang Port in China and the Boten Port in Laos have been operating over their designed full capacity.37 Due to a lack of coordinating mechanisms for multi

36 “Operation of the ILSTC in Western China,” Chongqing Municipal Development and Reform Commission, September 2, 2019, http://fzggw.cq.gov.cn/zwxx_167/bmdt/202002/t20200212_5185913. html.

37 For example, the designed daily capacity of Pingxiang Port in Guangxi is 800-1,000 vehicle trips. Due to closer economic and trade ties between China and Vietnam, the number of vehicle trips through the port has reached 1,200-1,500 daily, exceeding its full capacity.

modal transport regulation of different countries, cross-border highway shuttles have not achieved through services and fast-track clearance. The harmonization of core rules on cross-border transport, customs clearance, finance and international negotiations, as well as the standardization of relevant services, is still under exploration. Integrated management and mutual recognition of customs clearance have yet to fully materialize. Specified international cooperation between ports, customs and exit/entry points is also being advanced. The “single window” model for cross-border clearance has not yet been fully applied, nor has it aligned with the ASEAN Single Window (ASW) initiative.

Due to inconsistency between different modes of transport involved in the ILSTC with regard to market organization, business management, and standards of documents and insurance, consolidated shuttles have to be cleared within China, and the extra container de-vanning operation makes fast clearance simply impossible. Smart public services and electronic documents have not been broadly applied at ports. And neither a cross-border, cross-regional and cross-sectoral platform for sharing public information, nor a smart and standardized logistics information hub that integrates multiple transport modes has been set up.

Difficulties caused by overlapping cooperation mechanisms

As an open and shared platform for win-win cooperation, the ILSTC was initially dominated and advanced by Singapore. To motivate extensive participation by other ASEAN states, which include the Mekong countries, an effective institutional design is necessary. However, the overlap of domestic and international cooperation mechanisms in the ILSTC, whether it be participating actors, priority areas, or practical functioning, has further increased the coordination cost. In particular, the international cooperation mechanism is far from mature in terms of its organizational structure, operational pattern and policy-making procedure. A formal and effective institutional arrangement that is open, flexible, and based on consensus is still absent.

The plethora of existing mechanisms in the Lancang-mekong region, coupled with the features of weak institutionalization and soft constraint in the process of cooperation, can easily undermine the effectiveness of cooperation. Given the involvement of multiple countries, regions, provinces, departments, platforms and enterprises in mechanism building for the LMC-ILSTC synergy, the diversity of participating actors will result in a complicated network of mechanisms. Different positions taken by the different actors have led to different perceptions of interests and capabilities in mobilizing and integrating resources, which is most evident in the decreasing levels of institutionalization in international, inter-provincial and inter-enterprise cooperation. Taking into consideration the challenges mentioned above, in the process of synergizing LMC and the ILSTC, it is urgently necessary to accelerate “institutional consolidation” in such functional cooperation areas as customs facilitation, infrastructure standards, and inspection and quarantine.

Paths of LMC-ILSTC Synergy

The LMC-ILSTC synergy is an innovative practice of deepening and enriching Belt and Road cooperation in Southeast Asia. For the synergy to be effective, we need to squarely address the above-mentioned challenges. Based on existing bilateral and multilateral cooperation mechanisms, efforts should be made to innovate the paths of synergy and broaden the ways of sustainable development.

Gathering consensus by strategic alignment and value cohesion

With the common vision of building a Lancang-mekong community with a shared future, the adaptability at the strategic level of all countries concerned to the LMC-ILSTC synergy has to be put on a sound footing. By focusing on the alignment of national objectives, the optimization of supporting policies, and the design of specific projects, the strategic significance of the synergy and the cohesion of different values can be

substantially enhanced.

Giving full play to the status of strategic partnerships with the Mekong countries,38 China can advance the synergy in a more inclusive manner, while actively addressing the appeals and concerns of other parties. In particular, a “corridor plus” model is worth exploration. Centered on connectivity, industrial capacity cooperation and cross-border economic cooperation, China should step up formulation of roadmaps and action plans for the synergies between its Belt and Road Initiative and the development strategies of other regional countries, including Vietnam’s “Two Corridors and One Economic Circle” plan, Laos’ strategy to transform itself from a land-locked to a land-linked economy, and Myanmar’s East-west and North-south Economic Corridors. Once achieved, the synergies will feature a networked structure that involves one-to-one, one-to-many and many-to-many connections.

Based on the CHINA-ASEAN Strategic Partnership Vision 2030 and the “3+5+X” cooperation framework, China should work with regional countries to identify priority cooperation areas and issues under the Master Plan of Western New International Land-sea Trade Corridor and the Master Plan of Ayeyawady-chao Phraya-mekong Economic Cooperation Strategy (2019-2023). On this basis, a cooperation guide for investment and trade with the Mekong countries as well as an industrial guidance catalogue can be formulated, thus supporting a series of major projects in infrastructure connectivity, logistics facilities construction, industrial cooperation, and industrial park operation.

Promoting mechanism building and integration

To promote the LMC-ILSTC synergy, it is necessary to build an architecture of cooperation mechanisms, which would involve prime ministers and deputy prime ministers, ministerial officials, and provincial leaders, as well as committees in different professional fields (transport

38 Yu Hongyuan and Wang Wanfa, “Implementation of the 2030 Sustainable Development Goals in the Lancang-mekong Region: Progress, Challenges and Paths,” International Studies, No.1, 2019, p.83.

and logistics, customs and inspection, economy and trade, standards). While optimizing the existing synergies and cooperation mechanisms, it is worth consideration to incorporate the issue of LMC-ILSTC synergy into the topics of RCEP and ASEAN-CHINA (“10+1”) cooperation meetings. A special working group can be set up at an appropriate time to promote regular dialogue and joint meetings and facilitate “digital synergy.”

At the same time, the compatibility of domestic regulations with international norms should be strengthened. China and the Mekong countries should start to explore core transport, clearance and financial rules of trade facilitation as well as mechanisms for international negotiations, and improve cooperation between customs on information exchange, mutual recognition of supervision, and mutual assistance in law enforcement, thus enhancing connection and integration between domestic and international rules.

China should also speed up the establishment of a coordinated framework for external cooperation among the provinces along ILSTC routes. By giving full play to the three-layer structure in the China-singapore Chongqing Connectivity Initiative,39 China should work for positive dynamics between its management system, operational rules and multilateral cooperation mechanisms. In addition, it should motivate the participation of the Mekong countries in building a platform for ILSTC investment, construction, and operation. Making good use of Singapore’s status as an international financial center and a major trading hub for offshore renminbi, China can expand the scope and scale of bilateral local currency swaps and settlement with the Mekong countries, and help set up an integrated financial platform for multilateral supply chain and industrial capacity

39 A top-down three-layer management structure covering the central and local levels of China has been established in relation to the connectivity project’s policy-making and implementation. The first layer is the Joint Steering Council co-chaired by China’s Vice Premier and Singapore’s Deputy Prime Minister,in charge of steering the policy-making and project coordination at the top level. The second layer is the Joint Working Committee co-chaired by ministerial officials of the two countries, in charge of supervising the policymaking and project coordination at the central ministerial level. The third layer is the Joint Implementation Committee co-chaired by Mayor of Chongqing and a ministerial representative from Singapore, to implement the project on the ground.

cooperation.

Coordinating with other regional mechanisms

Inclusiveness and openness are precious assets of Lancang-mekong cooperation. The Lancang-mekong countries should conduct strategic dialogues with parties outside the region, seeking their greatest common denominator and new common interests. To facilitate positive interactions in the transition from malign competition to cooperative competition, an institutionalized and regular communication and coordination mechanism, to properly handle disputes and avoid strategic confrontation or escalation of conflicts, is worth exploring. Moreover, regional countries should speed up mutual strategic compatibility of issues, institutions, rules, and operational patterns in their bilateral, multilateral or sub-regional cooperation mechanisms, in order to mitigate political sensitivity and potential frictions in the process of synergy. Should conditions become mature, non-regional countries or international organizations can be invited to participate in LMC or the ILSTC construction.

Governance innovation is also an important direction of further efforts. An increase in the supply of regional public goods can substantially broaden the space for cooperation between different mechanisms. With the advantages and characteristics of different arrangements coming into play, the synergy of LMC and the ILSTC will further stimulate functional interaction and connection with other mechanisms, which is conducive to cross-border cooperation on non-traditional security issues like the narcotics trade, terrorism and human trafficking.

Enhancing cross-border connectivity in transportation and logistics infrastructure

As a first step and a necessary pre-condition for connecting crossborder facilities, the construction of a navigable Mekong waterway should be aligned with ILSTC infrastructure building. In the process, different participants, including the Joint Committee on Coordination of Commercial

Navigation on Lancang-mekong River (JCCCN), can play their respective roles in accelerating regulation, dredging, and upgrading of the Lancangmekong international waterway. While increasing the container capacity of Jinghong, Guanlei and Simao Ports, China can actively contribute to the renovation of container ports in Cambodia’s Phnom Penh and Thailand’s Chiang Saen.

The ILSTC Middle Line in the Indo-china peninsula is the highlight of any layout for a transport infrastructure network. Taking into account the construction of the Trans-asian Railway, an infrastructure connectivity program between the ILSTC and the Mekong countries can be formulated. China can help Vietnam advance the upgrading of the Hekou/lao Caihanoi and Dong Dang-hanoi Railways and the North-south Railway between Hanoi and Ho Chi Minh City. The construction of the Mohan/ Boten-vientiane section of China-laos Railway and the Bangkoknakhon Ratchasima section of China-thailand Railway can be accelerated with coordinated efforts from China, Laos and Thailand. In Myanmar, considering the location of Kyaukphyu Port and China-myanmar oil and gas pipelines, the planning of the sections of China-myanmar Railway from Ruili/muse to Kyaukphyu and Yangon via Lashio, and from Chinshwehaw to Lashio, can be further refined.

It is also necessary to cultivate multi-modal transport operators with the capability of doing business in a complicated international network. Through franchising and the build-operate-transfer (BOT) model, they can engage in the development and operation of logistics facilities such as port container terminals, breakbulk cargo terminals and port logistics parks. Taking advantage of the dedicated China-singapore (Chongqing) International Data Channel, and seizing the opportunity of the CHINA-ASEAN Year of Digital Economy Cooperation, China can step up cooperation on data channels with the Mekong countries.

Expanding Lancang-mekong trade and economic cooperation

With a development model that combines logistics, trade and

industries, the building of cross-border production and trade networks, and an industrial division of labor system, in which China would play a dominant role, will broaden the maneuvering space for industries and trade. Using the Silk Road Fund and the CHINA-ASEAN Investment Cooperation Fund, China can strengthen cooperation between its local provinces and the Mekong countries. Moreover, a construction model that integrates international freight train services with processing trade parks is worth exploring. Centered on agricultural products, mechanical equipment, electronic information, and textile and clothing industries, overseas industrial and trade bases can be set up in special economic zones in Thailand’s Rayong Province, Myanmar’s Lashio, Cambodia’s Siem Reap, and Laos’ Boten. China can also expand cooperation with Cambodia, Thailand and Myanmar in resource-intensive planting and mining industries, and help Vietnam, Laos and Cambodia develop new markets for their labor-intensive clothing and textile products.

In addition, the trade and investment policies in existing cross-border economic cooperation zones, including the Mohan-boten zone between China and Laos and the Ruili-muse zone between China and Myanmar, should be more transparent in order to promote the transformation and upgrading of border trade.40 The free trade experimental zones in Guangxi, Yunnan and Chongqing should give full play to their pioneering and firstmover advantages, and work to set up a series of open development platforms in countries where conditions are met. The platforms, which can be free trade zones, international land ports, customs bonded areas, or railway and aviation ports, can facilitate the synergy between transport infrastructure (railways, roads and waterways) and overseas trade and economic cooperation zones.

Improving clearance integration and efficiency

Starting from the establishment of cooperation mechanisms between

40 Tian Xinqing, “Trade and Investment Facilitation under the Lancang-mekong Cooperation Framework,” International Studies, No.2, 2018, p.65.

national customs authorities, China and the Mekong countries should optimize the supervision and operational procedures of customs, and promote the sharing and exchange of logistics information to reduce time and costs of cross-border transport. They can explore building an international multi-modal transport hub equipped with quality supporting facilities, and advance “single contract/single document” arrangements in multi-modal transport. Working with border port authorities, China can enhance the data interaction capability between waterway ports like Simao and Jinghong, and help advance the pilot scheme of China-vietnam joint border inspection at Pingxiang Port, which would achieve fast clearance of exports and imports. It should also launch “single window” cooperation with the Mekong countries and other ASEAN countries, and explore solutions of system connectivity and data exchange between electronic ports of different countries. A national “single window” pilot project in railway transport can be a useful first step.

Giving play to Singapore’s identity as an ASEAN member state, China can push for an ILSTC-WIDE unified transport coordination mechanism, and promote smooth connection between different customs clearance, carriers, and transport modes. Bilateral and multilateral cooperation can be explored on inspection quarantine, certification and accreditation, standard measurement, and statistical information.

Lastly, China should work to implement the Convention on International Transport of Goods Under Cover of TIR Carnets (TIR Convention) in its ports along ILSTC routes. The ports under the pilot scheme should expand to border ports like Pingxiang, Longbang, Mohan and Hekou, and further to inland ports. China can also assist Vietnam, Myanmar and other regional countries in acceding to the TIR convention.

Conclusion

The sudden COVID-19 pandemic has not only had a serious impact on global public health security, but has also created global threats

of varying degrees in other areas through spillover effects.41 In that context, “economic regionalization” is likely to replace the existing global industrial layout and division of labor, and become the economic basis and pattern of globalization in the future.42 Featuring a new type of subregional cooperation mechanisms, Lancang-mekong Cooperation is a major initiative and an active explorative project by China to advance its neighborhood diplomacy strategy. Given the current domestic and international imperatives, it is all the more important and urgent to enhance international industrial collaboration, maintain the security and stability of global and regional supply and industrial chains, and jointly address the challenges of unilateralism and protectionism. The synergy between LMC and the New International Land-sea Trade Corridor thus serves as a promising solution.

As a strategic vision, the LMC-ILSTC synergy is still in an early stage. The current priority should be to further gather strategic consensus of all the parties, promote an industrial division of labor, and an extension of value chains in the Lancang-mekong region, and support the construction of a Lancang-mekong economic development belt. In the long term, the significance of LMC-ILSTC synergy will not stop at increasing logistics and transport efficiency and expanding trade and economic ties. As it develops, an institutional framework that meets the demands of all parties will be gradually explored, designed, and introduced. Through the “corridor plus” model, the synergy is expected to boost the supply of public goods in the region, ensure high-quality and sustainable economic development, and foster the building of a closer Lancang-mekong community with a shared future.

41 Qin Yaqing, “Cooperation: An Iron Law for the Global Community with a Shared Future,” China International Studies, No.3, 2020, p.40.

42 Cui Hongjian, “The Dual Role of COVID-19 in Changing International Landscape,” China International Studies, No.3, 2020, p.79.

Chinese Premier Li Keqiang attends the third Lancang-mekong Cooperation Leaders’ Meeting via video link at the Great Hall of the People in Beijing, August 24, 2020.