China’s Belt & Road Initiative – Blog #12

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This is the twelfth Blog in a series based on The Geopolitical Significance of the Chinese Belt and Road Initiative and What it may Mean for Supply Chain Operations Worldwide, a Whitepaper (49 pg, 243 endnotes) researched and written for RAAD360 LLC ( The goal is to alert supply chain managers worldwide to the complex risks inherent in BRI. RAAD360 provides RAAD™, a cloud-based supply chain risk management platform.

Worldwide Supply Chain Risk Series

China’s Belt & Road Initiative

Blog #12 – China-Indochina Peninsula Economic Corridor:  Thailand


Source: ESCAP (From Presentation by Binyam Reja, Ph.D., The World Bank at the 2018 Annual Meeting of the Transportation Research Board, Washington, D.C.)

Both state-owned and privately-owned Chinese-controlled or affiliated businesses have made extensive investments in Thailand.  Hutchison Ports, a subsidiary of CK Hutchison Holdings Ltd. (Hong Kong), is undertaking a major port expansion and renovation at Laem Chabang.  When complete, it will feature a fully-remote-controlled container terminal that will add 3.5 million TEUs to the port’s capacity.[1]  The newly installed technology is expected to reduce labor needs by 25%, which is actually a benefit to the Thai economy that is currently experiencing a labor shortage.  The port upgrades should position the port well for the projected increase in trade stemming from the “Belt and Road Initiative”.[2]

A major, planned “Belt and Road” infrastructure project is the Kra Canal (also called the Thai Canal) which would provide China with an alternative to using the Strait of Malacca, by connecting the Gulf of Thailand with the Andaman Sea.[3] (See map below). However, it is uncertain as to when this might be realized.

Discussions and studies of a potential canal across the Thai peninsula have gone on for more than three centuries.  While the concept looks good on maps, the economic, political and technical realities pose major roadblocks.  Nevertheless, China’s persistent push to get work started seems to have paid off, although Thailand has made a guessing game about whether work has actually begun.  Earlier this year, Thai officials stated that the Kra Canal project was “not a priority” and it was still “under review.”[4]

Technically, the canal poses significant engineering challenges.  A long, granite mountain ridge runs down the center of the peninsula; its height varies from 250 to 4,600 feet above sea level.  Digging through this would be a massive undertaking, but the alternative of building a series of locks increases the canal cost prohibitively 10 to 20-fold.[5]  The amount of excavation material, whether the canal is at sea-level or uses locks, poses a huge, environmentally-hazardous disposal problem.  The problem would continue with a sea-level canal, due to the constant dredging that would be required in this location, which is subject to siltation and monsoons.

Politically, the project is charged as it would definitely upset the status quo and create ‘winners’ and ‘losers’ in the maritime arena, change national military advantages, and raise fears about growing Chinese dominance in all of Asia as well as the Middle East.

Singapore could lose nearly a third of its share of sea traffic between the Indian and Pacific Oceans.[6] Ports in other countries in the region would also see changes in their traffic, some more, some less.  Assuming the canal is built to widths and depths to accommodate the largest ships, the canal could draw a sizable share of post-Panamax vessels.   The Strait of Malacca is a true bottleneck, being just 2.7 km wide at its narrowest point and a minimum depth of only 25 meters, insufficient for the larger ships.  These mega-ships have had to go the long way around the Indonesian archipelago.[7]

Economically, the canal could be a large boon to the Thai economy—if Thailand retains control and administration of it and can charge transit rates that cover costs, including loan servicing, and yield a profit.  That is not a sure thing at this point.  The cost of construction has been estimated to be around US$28 billion, not including the cost of creating facilities to provide the ancillary shipping services to make it competitive with Singapore, such as drydocks, repair, and resupply facilities.

A special economic zone complementing the canal, would cost an additional US$22 billion.  Plans describe it in ambitious terms:  The new zone includes the “addition of cities and artificial islands, which will enhance new industries and infrastructure in the region.  This would make Thailand into a ’logistic hub’ and link Thailand to countries from all over the world.”[8]

How much the Thai economy would benefit from the construction of the canal is open to question.  Longhao, a Chinese construction company likely to be a project lead, anticipates bringing over 30,000 Chinese workers to build the canal.  This would account for the large workers’ community shown on the map below.

Chinese proposal for Kra Canal

Source: IIMS, “The Kra Canal Project.” (

China reportedly has proposed to make $28 billion in loan funds available for the Kra Canal project, but Thailand also has been soliciting funding from other sources, including Japan, South Korea, India, and other ASEAN countries.[9]  The lessons of what happened to Hambantota in Sri Lanka and Gwadar in Pakistan with entirely Chinese loans have not been lost on Thailand.  It would be unacceptable if China were to be the primary lender, Thailand defaulted, and China took control and ownership of the canal.

The shipping time and cost savings proponents of the canal see are shown in the second map below.   They are significant and could become all the more important as the Malacca Strait reaches maximum throughput capacity, projected to occur in just a few years.  Over 84,000 ships per year pass through now, and with expectations of economic growth, that number will rapidly increase.[10]

Another big “Belt and Road” infrastructure project in Thailand is a high-speed rail line that will link Thailand’s border with Laos to ports and industrial centers in eastern Thailand.  This is part of China’s great scheme to link eight Southeast Asian countries with China and key access points to the Maritime Road.  The project has been off to a rocky start as Thailand balked at China’s first price tag of $16 billion for this rail link and negotiated the cost down to $5 billion.[11]Other points of contention arose over design issues and terms of the contract, such as interest rates.[12]

Time savings of Thai/Kra Canal compared to alternative routes

Source: (Image courtesy:


Questions –

Where does my supply chain intersect with China’s “Belt and Road” transportation network?

What about my supplier’s supply chain?

Can China’s monopoly power increase transportation times in my supply chain?

Can China’s monopoly power increase transportation costs in my supply chain?


BRI Blog next Monday will be:

China-Indochina Peninsula Economic Corridor:  Laos and Malaysia


There is a wealth of information in the end notes to each Blog article.  Click the URLs to bring the sources onto your computer screen for review.

[1] The Maritime Executive.  “Remote-Controlled Terminal to Open in Thailand.”  10 May 2018.

[2] The Maritime Executive/ MAREX.  “Remote- Controlled Terminal to Open in Thailand.” 10 May 2018.

[3] Gamage, Rajni.  “Bay of Bengal:  What Implications for ASEAN?”   Op.cit.  P. 66.

[4] The Straits Times.  “Proposed Kra Canal not a priority for  Thai govt.”  13 February 2018.

[5] Micallef, Joseph V.  “The Geopolitics of the Kra Canal.”  10 April 2017.

[6] Lay, Belmont.  “Thais called to support S$38.2 billion Kra Canal construction that will bypass S’pore ports.”  Mothership.   10 August 2017.

[7] Stratfor/ Worldview.  “Avoiding Dire Straits in Southeast Asia.” 17 November 2017.

[8] Menon, Rhea.  “Thailand’s Kra Canal:   China’s Way Around the Malacca Strait.”  (Op. ed.)  The Diplomat.  6 April 2018.

[9] China Daily Mail.  “China to build Kra Canal across Thailand to bypass Malacca Strait.”

[10] FirstPost.  “Thailand’s Kra Canal project is China’s masterplan to secure Beijing’s interests, assert influence in ASEAN, Indian Ocean Region.”  6 April 2018.

[11] Reuters.   “Thailand, China agree on $5 billion cost for rail project’s first phase.”  21 September 2016.

[12] Hunt, Luke.    “Construction of Thailand-China Railway Finally Gets Underway.”  The Diplomat.  28 December 2017.


© Shirley M. Loveless, Ph.D. 2018

Dr. Loveless is a consultant, author, and educator in transportation systems, supply chain risk analysis, emergency management, and economic development.  She is a Member of the Transportation Research Board of the National Academies of Sciences, Engineering and Medicine, and an appointed member of several TRB Standing Committees.  She works with RAAD360 LLC as a supply chain transportation consultant.