China and Vietnam are engaged in discussions to potentially enhance their underdeveloped railway connections, with the aim of bolstering a rail line that traverses Vietnam's rare earths-rich region and connects to the country's primary northern port. Senior officials and diplomats have confirmed these talks, which coincide with preparations for a potential visit to Hanoi by Chinese President Xi Jinping in the coming weeks. This visit would underscore Vietnam's growing strategic significance in global supply chains, particularly as major powers like the United States seek to expand their influence in the region.
Both nations have expressed a commitment to strengthen trade ties and promote railway connections, as indicated in a statement published on the Vietnamese government portal following a meeting between China's top diplomat, Wang Yi, and Vietnamese leaders in Hanoi.
Vietnamese Prime Minister Pham Minh Chinh had previously advocated for the upgrade of the railway that links Kunming in southern China to Vietnam's Haiphong port city. China's Commerce Minister Wang Wentao's recent visit to Vietnam further highlighted the importance of enhancing infrastructure connectivity between the two countries.
While Vietnam already has railway connections with China, the existing system is outdated and has limited capacity on the Vietnamese side. Additionally, the two systems are currently non-interoperable, necessitating stops at the border for the transfer of passengers and goods to domestic services.
The proposed railway upgrade would pass through Vietnam's largest rare earths deposits, an area where China dominates global refining. Vietnam has been striving to develop its own rare earths industry, potentially challenging China's supremacy. However, internal disputes within Vietnam have cast doubts on these efforts.
Experts in the rare earths industries of both countries recently discussed stronger cooperation in processing these minerals, according to Vietnamese state media.
The level of financial contribution from China to the upgraded railway project in Vietnam and whether Hanoi would accept significant financing from Beijing remain unclear.
While the railway could align with China's Belt and Road Initiative (BRI), which supports global infrastructure investments, it is uncertain whether it will be officially designated as a BRI project.
On a related note, the Vietnamese government announced that negotiations between the two countries have concluded to facilitate connections between Vietnam's infrastructure projects and the BRI.
An improved railway link has the potential to boost Vietnam's exports to China, particularly in the agriculture sector, encourage Chinese tourism in northern Vietnam, and further integrate their manufacturing industries. Currently, factories in Vietnam primarily assemble components produced in China, forming a symbiotic relationship.
China is Vietnam's largest trading partner and the primary investor this year, including investments from Hong Kong, as some Chinese companies relocate their operations south amid trade tensions between Beijing and Washington.
Despite robust economic ties, the two communist nations remain embroiled in a long-standing maritime dispute in the South China Sea and have a history of conflict, including a brief war in the late 1970s.