Asean firms hope China’s first river-to-sea canal will open market but fear flood of imports
Vietnamese coffee chain Trung Nguyen Legend has been brewing up big business in China, serving its signature slow-dripped ground blends sourced fresh from Vietnam.
As its network of stores expands across China, logistics has become a bottleneck. It focuses on buying coffee beans in season from plantations in Vietnam, but road-and-sea transport to China follows a circuitous route with occasional delays.
It hopes China’s first river-to-sea canal, which opened earlier this month, will offer a short cut.
Businesses across Southeast Asia also hope the Pinglu Canal, which fills a missing link between China’s southwestern hinterland and international maritime corridors, can be a conduit for the flow of goods into the world’s second-largest economy, not just another route for the tidal wave of Chinese exports hitting their shores.
“Large seagoing barges carrying coffee beans from Vietnam will be able to sail along the new canal straight up to Nanning and other inland Chinese hubs,” said Trung Nguyen’s regional co-manager in Nanning, Huang Weiqiang. “No need to change to smaller vessels … potentially, this can bring more sales for us in China.”
The 11 members of the Association of Southeast Asian Nations (Asean) eagerly anticipated the launch of the 134.2-kilometre canal in southern China’s Guangxi Zhuang autonomous region. Many expect a positive spillover for trade and logistics, as it connects inland rivers and shipping arteries in southwestern China to the Gulf of Tonkin – known as Beibu Gulf in China.
The canal is the first man-made waterway connecting a river to the sea to be built since the founding of the People’s Republic of China in 1949, state-run Xinhua News Agency reported earlier.
With a planned investment of 72.7 billion yuan (US$10.8 billion), the project, which began construction in August 2022, is designed to accommodate vessels of up to 5,000 tonnes and save more than 5 billion yuan in overall transportation costs each year.
However, concerns have also been raised that the new infrastructure might make China-Asean trade even more lopsided.
Exporters and trade officials from Vietnam, Thailand and Singapore at the annual China-Asean Expo in Nanning, Guangxi’s regional capital, which ended on Sept 21, said the canal should benefit foreign businesses to the same degree as Chinese exporters.
“The canal should facilitate two-way trade, especially when Beijing has vowed umpteen times to expand imports,” an official from the Thailand Board of Investment’s Guangzhou office said.
“It should not only be for China [exporting] to Thailand, but also Thailand to China. More Thai goods, be it durian, rice or electronic components, can [hopefully] flow via the canal deeper into China.”
Hopes that the canal will spur more Chinese imports stem from the trade deficit that Asean has racked up with China, the bloc’s largest trading partner.
Asean imported US$546 billion worth of goods from China in the first eight months of this year, up 25.8% year on year, while the bloc’s exports to China stood at US$316.7 billion, China Customs data showed.
As Pinglu Canal helps cargo skip transits through Guangzhou or Shanghai, slashing distances and costs and avoiding congestion, the Thai official said her country’s trade deficit might grow.
Analysts said the canal might bind Southeast Asia’s economic geography closer to inland China amid shifts in trade influence.
“Pinglu is a double-edged sword; Asean as a whole must proactively study the implications and make the best use of it,” said Alice Chan, managing director at the Singapore-based APAC Innovation and Collaboration Centre.
Chan added that trade accords like the Regional Comprehensive Economic Partnership (RCEP) could ensure the canal’s benefits were evenly distributed and felt in China and Asean.
Phar Kim Beng, professor of Asean Studies at the International Islamic University Malaysia, agreed that the canal should be a two-way trade street, not just another way for Beijing to project its industrial and trading dominance.
“Once goods from Guangxi and China’s broader southwest enter the Beibu Gulf, they are already facing Asean … Pinglu is China’s new southern economic artery,” he wrote in a report published this month. “Asean must prevent the corridor from becoming a one-sided avenue … the greater opportunity lies in making Asean products penetrate deeper into western China’s markets.”
He said the question was no longer simply how Malaysian products could reach Shanghai, Shenzhen or Guangzhou, and “Malaysia must examine how its companies can reach the enormous economic spaces beyond China’s traditional coastal centres.”
While the Pinglu Canal evokes mixed reactions, direct freight routes that would not have been possible without it, like the one between Nanning and the Vietnamese port city of Can Tho in the Mekong Delta, hold the promise of two-way opportunities.
Trung Nguyen, the Vietnamese coffee chain, was among the businesses that would consider using the new routes, its executives said at the expo in Nanning.
The 14-year-old China-Malaysia Qinzhou Industrial Park, strategically located in the city where the canal empties into the sea, is also hoping to tap its potential and has stepped up industrial cooperation efforts to encourage more foreign manufacturers to set up shop there.