VANG VIENG – Decades before it became a favoured stop for backpackers seeking alcohol-fuelled parties and adventure, Vang Vieng’s limestone karst and turquoise lagoons offered a stunning backdrop to a covert airstrip operated by the US Central Intelligence Agency (CIA).
Known as Lima Site 6, it was used during the Vietnam War to support bombing secretly carried out by the United States against the communist group Pathet Lao.
So the symbolism was unmistakable when local authorities announced in 2018 that the 300m-long disused airstrip would be taken over by Chinese investors and redeveloped into a site with five-star hotels, a cultural theatre and other tourist attractions.
The investment thesis seemed straightforward enough. At the time, construction was well under way on the US$6 billion (S$7.83 billion) Laos-China Railway (LCR), part of Chinese President Xi Jinping’s signature Belt and Road Initiative.
Vang Vieng is one of the main stops on the high-speed passenger rail and commercial freight line, which was completed in 2021. It connects China’s south-western Yunnan province to the Laos capital, Vientiane, cutting travel times dramatically. In the future, there are plans for extensions through Thailand and down to Singapore.
The Laos-China Railway runs 422km from Vientiane to Boten and connects to Kunming
The Mekong River has been the lifeblood of agriculture and civilisation across Indochina for millennia. Now, a new breed of mercantilist opportunists are betting on the 422km system of elevated tracks and tunnels cutting through landlocked Laos to be a major catalyst for new trade and capital flows.
The results so far, however, have been double-edged, reflecting a slowing China’s tapping of the brakes on big-ticket overseas expenditure, and the practical limitations of Laos’ small economy.
Changes wrought by Chinese money
Most travellers skip the border town Boten, the first stop on the high-speed rail line after crossing from China.
The hardscrabble town has recently become a window of sorts to China’s slowing economy and waning investor enthusiasm, with rows of unfinished buildings dormant behind faded banners touting a special economic zone (SEZ).
Once a sleepy border post, Boten had been transformed by Chinese money before, and was infamous for the Golden City casino that flourished in the early 2000s. Attracting gamblers from across the border but also a reputation for crime and vice, the casino was eventually closed by the authorities.
Boten became mostly abandoned in the early 2010s, until it was reinvigorated by the activity around the LCR – though there are signs that even that flurry has begun to taper off.
Chinese characters dominate Boten’s landscape, appearing in street names and on road signs, such as at this crossroads heading to Lao-China Friendship Avenue.
The yuan is widely accepted as currency, both in cash and through WeChat or Alipay QR codes. Most restaurants serve almost exclusively Chinese cuisine.
Chinese characters can also be found on shop signage and advertisements throughout the town, such as this poster promoting a logistics company.
Boten is now mostly populated by a trickle of Chinese migrant workers looking to make a go of it in a low-cost frontier town that offers a more appealing prospect than a lifetime of exhausting itinerant work on the Chinese mainland.
Mr Wang Jie, in his mid-50s, is a native of central Hunan province who moved to Laos with his wife more than a decade ago. He now rents out cheap, short-stay rooms in flats to passing travellers.
There are people who make money and people who lose money.
There is also a steady stream, local residents said, of small-time Chinese businessmen looking to dodge creditors back home, another reflection of the tough economic environment across the border. “Bare branches” – a Chinese term for single, middle-aged men – also arrive seeking prospective wives from surrounding villages.
In historic Luang Prabang, the scenes at its high-speed rail station could be out of any typical Chinese town along China’s 48,000km network. The train looks identical, save for the strips of blue, red and white – the Laotian flag colours – on the train livery.
The layouts of train stations are also carbon copies of those in China, from the ticket booths and security check down to the waiting areas and platforms.
As the train pulls into the station and comes to a stop, a frenetic crush of people spills out of the carriages, making a beeline for the platform exit. A large number of the passengers are part of Chinese group travel tours, shepherded by flag-toting guides onto waiting tour buses.
Unesco heritage-listed Luang Prabang has long enjoyed a reputation as a trendy destination on the tourist trail.
It draws travellers with its tranquil lanes, quaint architecture and atmospheric setting on the Mekong River.
But it was the opening of the high-speed rail link that led to an explosion of tourist arrivals from China.
There were 438,355 Chinese tourist arrivals in 2024, nearly seven times the previous year’s figure of 62,900 and making up 28.6 per cent of all foreign visitors.
While the soaring number of Chinese visitors has been a boon for Laos’ tourism and hospitality sectors, some local tourism operators said the benefits have been unevenly distributed.
The majority of Chinese tourists arrive on bulk group tours, which have sprouted extensive self-contained Chinese-owned ecosystems.
These include the minibuses that pick tourists up at the railway station, the accommodation, restaurants and souvenir shops. The old tourist information centre, in fact, has been converted into a bustling Chinese hotpot restaurant.
All this stems from Chinese tourism operators having the financial capital, knowledge of what customers of packaged tours want and contacts with package tour providers. Many Chinese businesses also use local cutouts or nominees to circumvent curbs on majority foreign business and land ownership.
“If you ask any local tourism operator, they will tell you they barely get any Chinese business,” said Mr Sern Siriphong, who owns a bicycle rental business in Luang Prabang’s main tourist strip.
“It does us hardly any good. There are lots more Chinese people here, but we don’t see them. They live and sleep in their own hotels and eat at their own restaurants.”
Adding insult to injury, he said, are the fleets of bright-green Chinese e-scooters that started to appear on Luang Prabang streets a few months earlier. Unlocked via QR code, the scooters are popular with independent Chinese travellers, further eating into his business.
And while a mention in the Lonely Planet travel guidebook would have been coveted back in the day, it is now the modern Chinese equivalent – a viral positive post on the Xiaohongshu social media platform – that could provide a veritable licence to print money.
Slow pace of progress, heavy debt burden
While the high-speed rail connections have dramatically cut down travel times between major cities, many of the basic roads and much of the infrastructure immediately surrounding the railway stations remain unimproved.
In Vientiane, rail passengers are greeted immediately by long stretches of potholed dirt roads, dragging out what would be a straightforward 15km drive to the heart of downtown to upwards of 90 minutes.
On the south-east fringes of Vientiane, the That Luang Lake SEZ is centred on an artificial lake created by filling in surrounding marshlands.
In sales offices for the SEZ and associated real estate developments spearheaded by a Shanghai property developer, elaborate scale models and glossy brochures promote a futuristic vision for the area it said was inspired by none other than the Bund – the iconic and thriving Shanghai riverfront – with lakefront skyscrapers, shopping centres and high-rise flats.
Progress, however, has been slow, with just a handful of partially built flats, some serving as showrooms for prospective investors while others are converted into makeshift hotels, catering to a growing clientele of South Korean golf tourists.
Salespeople for the projects said progress had been especially hard hit by the coronavirus pandemic, but that sales are showing signs of picking up with interest from Chinese, Thai and South Korean buyers.
Many of these teething pains might matter less if not for Laos’ parlous debt situation. The crisis stems not just from the expensive railway but also a series of hydropower and transmission projects funded by China and loosely framed under the government’s vision of becoming the “Battery of South-east Asia” by exporting electricity to neighbouring countries, including Singapore.
Laos owes more than half of its public debt to China, according to official data from its Ministry of Finance. The International Monetary Fund (IMF) estimates Laos’ total debt to be 118 per cent of its 2025 gross domestic product (GDP), and projects it to reach 127 per cent by 2029.
Laos’ mounting debt over the years
The country’s foreign currency reserves and the value of its kip have plunged, with the kip having halved against the US dollar since 2022, leading to double-digit percentage inflation and increased food insecurity. And Laos’ balance sheet has made it all but uninvestable to the rest of the world, right when it should be reaping demographic dividends.
“Laos’ debt crisis has received little international attention and scrutiny, reflecting the country’s opacity and the minor exposure of international bond investors,” the Sydney-based think-tank Lowy Institute said in an April report.
“Yet, China’s outsized role makes the Lao crisis a crucial case study in an era when China has become the world’s largest bilateral creditor to developing countries.”
While investing in nation-building infrastructure to harness Laos’ natural geographical advantages and generate export earnings from hydropower may make sense, the reality has been different.
A large amount of the debt incurred, Lowy Institute said, went into a major expansion in hydropower to serve the domestic energy market, not for export. This has resulted in more electricity being produced than domestic demand can absorb, with excess overcapacity now being explored for cryptocurrency mining.
The result has been major financial losses for state-owned utility Electricite du Laos (EDL), which was the subject of a US$555 million lawsuit by a subsidiary of PowerChina via the Singapore International Arbitration Centre in March over unpaid dues.
EDL had already ceded majority control of its transmission unit to the state-owned China Southern Power Grid in 2020 over mounting debt and Laos’ strained public finances.
The Lao economy is now almost entirely dependent on debt deferrals from China to prevent it from plunging into default like Sri Lanka or Zambia.
Like Sri Lanka and Zambia, the Laos government was seduced by futuristic infrastructure and the promise of low-interest loans with seemingly few strings attached.
Top 5 countries that lend to Laos
Professor Toshiro Nishizawa, an expert on sovereign debt and emerging Asian economies at the University of Tokyo, however, disagrees with predominantly Western narratives of Chinese “debt trap diplomacy”. The idea that Beijing seeks strategic influence or to appropriate key infrastructure by plunging other countries into debt, he said, would come at major political and economic cost to itself.
“Yes, it is expensive,” he said of the LCR. “But now the railway is there as an asset for Laos. In fact, there is a massive flood of tourists from China, and also goods are exported using that railway.”
Prof Nishizawa also pointed out that Laos itself had courted China to invest in a railway long before the advent of the BRI, suggesting that both countries’ incentives were aligned.
“I don't know whether the return is high enough to compensate for the cost, but at least it’s working,” he added.
Undoubtedly, the cost is high. More than half of Laos’ revenues go towards servicing debt, money that could otherwise be spent on healthcare and education. Increasing numbers of young Laotians are eschewing university, leaving for menial jobs in factories and farms in Thailand and South Korea which pay more than typical starting graduate salaries at home.
“Notwithstanding solid (economic) growth, supported by the tourism and resources sectors, the economic situation remains very challenging,” the IMF said in its most recent country staff report in November 2024, rating the country as being in “debt distress”.
“Despite fiscal consolidation, public debt remains elevated and government financing needs are expected to increase.”
Securing the future for young Laotians
The velocity of Chinese money has grated on many Laotians. Many equate, fairly or otherwise, the influx of cashed-up Chinese investors over the years with the laundering of ill-gotten gains from the explosion of scam centre activity in recent years.
This is largely centred on the Golden Triangle border area, and in other hot spots across the region, especially in Laos, Cambodia and Myanmar.
“We are attracting the wrong kind of Chinese,” said 34-year-old information technology (IT) master’s graduate Phouthasone Sithisack.
In comments echoed by others who spoke to The Straits Times, he questioned why savvy businessmen would prefer to invest their capital in Laos over neighbouring countries with arguably greater prospects, like Vietnam or Thailand. “They bring dirty money to wash clean in Laos.”
The animosity does not always go unnoticed. One Chinese business owner from Yunnan province’s cultural tourism hub, Xishuangbanna, said he prefers to keep a low profile while travelling the Laos countryside to source coffee beans.
“I try not to tell them where I’m from – they are quite anti-China in the villages,” the businessman, who did not want to be named, said.
Chinese tourists also complain of being singled out for their perceived wealth, from being shaken down for extra fees while clearing immigration, to being targeted for fines for smoking in public or for traffic infractions while riding scooters.
More ominously for the longer-term prospects of Laos’ tourism industry, Chinese travellers who spoke to ST, including many on group package tours from neighbouring provinces, were lukewarm about their overall experience.
“It feels like the food and hotels aren’t great,” one said. “If you have to pay more for good hotels, then you might as well travel within China.”
While most Laotians are not fully aware of the poor state of the country’s finances, Mr Phouthasone said the LCR had not improved the lives of ordinary workers, himself included, who are hard hit by the devalued kip.
He said he quit his stable but modest-paying job as an IT manager at a state-owned firm in 2023 when cost-of-living pressures started to bite, and turned to importing electric vehicles from China. The job initially paid well, before his margins were squeezed by copycat competitors.
Mr Phouthasone is far from the only one to seek opportunity from the Chinese influx.
More and more Laotians are studying the Chinese language, some attending night classes.
They hope, for instance, to score jobs at Chinese-owned businesses or find work as translators or tour guides.
Mr Chinphing Seowh will be part of just the second batch to graduate from his course in teaching Chinese at the Confucius Institute at the National University of Laos (NUOL) in Vientiane when he completes his studies in 2026.
Hailing from Bokeo province, home to the Chinese-owned Golden Triangle SEZ, Mr Chinphing, who is of Chinese descent, said he grew up seeing “Chinese bosses” doing business.
At 25, Mr Chinphing is older than the vast majority of his peers. He said he decided to go back to school after translation work stints at construction sites made him realise that improving his language skills could lead to further opportunities.
“My goals are not that lofty,” he told ST in fluent Mandarin. “Laos is a poor country, and I just want to better myself.”
With more than 1,000 candidates, Chinese language programmes attracted the highest number of applicants of any course at NUOL, according to local media reports, helping to reverse a trend of steady decline in university applications across Laos.
The NUOL said 6,200 candidates took its annual entrance examinations in August, up from the previous year’s 5,400. But that remains well down on pre-pandemic applications of 9,000, and even lower than average application levels of 15,000 a decade ago, highlighting the pressures that a devaluing kip and plunging purchasing power have had on young Laotians, who are entering the workforce as soon as they can.
Ms Kaoree Vang, 20, the youngest of seven siblings, is the first in her family to go to university, to study the Chinese language at NUOL. Her family has a rubber plantation in Vang Vieng, and she stands to get a scholarship to Guangxi Minzu University in China if she does well in her course.
A World Bank report published in May said economic pressures led to an increase in migration from Laos to Thailand, from 233,132 in May 2022 to 291,844 in January 2025, while migration to South Korea doubled from 2,815 to 5,602 over the same period.
It also said more than half of households surveyed reported reducing food consumption, while one-third cut back on savings and expenses like healthcare and education. In response to persistently high food prices due to inflation from the depreciating currency, many families have turned to growing or gathering their food, it said, with most households cutting back on consumption of pricier foods like meat and fish.
The World Bank projects economic growth for Laos to come in at 3.5 per cent for 2025, slower than the 4.1 per cent from 2024, despite what it said were commendable efforts by the country to keep its public spending in check.
“Despite these advances, public debt remains at unsustainable levels, and the government has increased its domestic borrowing, which could crowd out the credit available to private companies, especially small firms.”
In July, the Laos government said it would merge major ministries to cut costs and become more streamlined and efficient, describing the changes as an “urgent necessity”.
Laos’ estimated GDP growth for 2025 is below the 4.7 per cent IMF estimate for Asean countries as a whole, and ahead of only Singapore and Thailand, which have considerably larger economies; war-torn Myanmar; and Brunei, which has a substantially higher GDP per capita. Laos’ nominal GDP per capita of US$2,174 ranks it ahead of Myanmar and newest member Timor-Leste in the Asean grouping.
Like many countries where remittances from migrant workers are an important contributor to the economy, the exodus of young Laotians is particularly noticeable in the villages. It has long been a rite of passage for many from the countryside, with many working in factories and farms in neighbouring Thailand or other wealthier countries.
All five adult children of retired farmer Khoun Thandon, 71, work as farmers in central Thailand, sending home about 1,000 baht (S$40) a month to help him with his medical bills and living expenses.
The drive to his village, situated along the Mekong on the outskirts of Vientiane, is marked with many “land for sale” signs and advertising boards, many in Chinese characters.
In the same village, Ms Noyneng Somsamoud, 39, is hoping to buck the trend. While her husband has worked on a farm overseas for seven years, one of their two sons just enrolled at a university to study IT while the other is still in high school.
Villager Noyneng Somsamoud:
Nowadays, not many kids want to go to school; many children just want to focus on making money.
Back in Vang Vieng, barely a stone has been turned on the disused former CIA airstrip, some seven years since the plans were announced. There is no discernible trace of development works, and there has been no update since the authorities ordered street food vendors to clear the area in 2023 ahead of construction. The airstrip is empty except for a small section being used as a parking area for minibuses heading to Vientiane on a new tollway, incidentally also built by the Chinese.
Much of the go-slow approach, as with the stalled projects in other cities and towns from Boten to Vientiane, is likely to be at least partly by design.
Having secured a 50-year concession for the site, the developers for the Vang Vieng airstrip have little impetus to hurry, especially if raising capital and business interest is proving difficult in unfavourable macroeconomic conditions. In essence, it is a form of strategic land banking for long-term appreciation; if the regional economy takes off, there will be no shortage of investors pouring in to expedite the project.
There would presumably be contract milestones to hit, and Laos authorities can threaten to revoke the concession if the project remains idle. But there are few alternatives to turn to, especially with the US in retreat, threatening tariffs and the withdrawal of funding for the removal of unexploded ordnance, another Vietnam War-era legacy.
“It won’t be so quick,” said the Chinese owner of a tour company that has operated in Vang Vieng for more than 20 years. “And it won’t be as big as they say. There’s only so many tourists.”