China to widen Asean trade with first major waterway in 700 years, but will Pinglu Canal be a game changer or white elephant?

Construction of what would become the 1,800km Grand Canal – the Unesco World Heritage site built to link east China’s business hub of Hangzhou and the capital city of Beijing – was then completed during the Yuan dynasty over 700 years ago.

But until August, when construction started on the Pinglu Canal, no other new canals had been built.

The 135km, 72.7 billion yuan (US$10.1 billion) project is seen as not only a chance to develop the southwestern border region of Guangxi, but also highlights China’s state-of-the-art construction techniques and strategic thinking amid a fast changing geopolitical landscape.

“The practical value of this project is worth looking forward to,” said Gao Zhendong, a veteran consultant who helps Chinese firms explore investment opportunities in Southeast Asian countries.

“This is equivalent to more capillaries to glue closely together China and the Association of the Southeast Asian Nations markets,” Gao added, referring to the 10-member Asean bloc.

Gao expects heavy two-way flows of cargo as “the cost savings of this waterway will be high”.

The canal, a signature project in China’s Western land-sea trade corridor to reach the Beibu Gulf – also known as the Gulf of Tonkin – and the South China Sea, is expected to carry 108 million tonnes of cargo by 2035 and 130 million tonnes by 2050, according to the environmental impact assessment report.

It would enable container ships or bulk carriers to sail from the regional capital city of Nanning to Vietnam, Malaysia, Singapore, Indonesia and other Southeast Asian countries in weeks.

It also bears Beijing’s hopes of making the Asean bloc, which has a population of 600 million and is already China’s largest trading partner, a key to counter the influence of the United States.

Beijing has deepened bilateral cooperation with an annual dialogue mechanism, its Belt and Road Initiative and the 15-member Regional Comprehensive Economic Partnership, which includes China, the Asean bloc, plus South Korea, Japan, Australia and New Zealand.

In his meetings with Asean foreign ministers in Jakarta earlier this month, China’s top diplomat Wang Yi called for all-round cooperation to deepen the bilateral strategic partnership and build a closer community with a shared destiny.

The two sides have held three rounds of talks since February to update their existing free-trade agreement, which will increase the flow of people and goods.

Infrastructure connectivity is seen as one of the top priorities, as shown in Beijing’s Belt and Road Initiative and the Beijing-headquartered Asia Infrastructure Investment Bank.

Huang Yonghui, a senior consultant with the Guangxi Development and Reform Commission, said China needs further dense logistics networks to ensure closer bilateral supply chains, as well as economic and trade exchanges.

The Pinglu Canal would improve the bilateral infrastructure connectivity puzzle, enabling Guangxi to have comprehensive links to the neighbouring Southeast Asian markets through road, railway, shipping and flights.

“The international situation is so severe that Chinese enterprises should cooperate more closely with Asean,” said Huang.

“The ports have great prospects in the future.”

China is not alone in reshaping its national strategic development by building canals, with both the Suez Canal in Egypt and the Panama Canal that connects the Atlantic Ocean with the Pacific Ocean having played significant roles in geopolitics over the years.

The proposed Thai Canal, also known as Kra Canal or Kra Isthmus Canal, would also offer an alternative connection to the from the Malacca Strait between the Indian Ocean and the Pacific Ocean via the Gulf of Thailand and the Andaman Sea.

The idea of the Thai Canal has been discussed for decades since the administration of Prime Minister Thaksin Shinawatra in the early 2000s, but in China, construction of the Pinglu Canal started quickly.

Thousands of workers and engineers are working day and night on its construction, while thousands of excavators are pushing to hit the completion deadline of 2026.

Currently, goods from Western China have to travel to Guangzhou and Hong Kong via the Xi River and Pearl River, but after the completion of the Pinglu Canal, the voyage from the Western hinterland provinces to the sea will be shortened by more than 560km (348 miles).

The canal would be able to accommodate vessels of up to 5,000 deadweight tonnes – the amount of weight a ship can carry – and has the potential to save more than 5.2 billion yuan (US$725 million) in annual transport costs, according to official estimates.

Once completed, it would be the biggest canal in the world connecting river and sea, with a total earthwork excavation of more than 339 million cubic metres (12 billion cubic feet) required.

“Countries like the Netherlands actually have similar projects, but not as large as the Pinglu Canal,” said Pan Jian, deputy head of the canal’s command centre, who said the earthwork excavation would be three times that of the Three Gorges Dam.

Facing water stress amid ongoing changing climate concerns, the canal will feature the three largest inland water-saving ship locks in the world, which aim to handle a drop of around 65 metres (213 feet) between the water surface of Xijin Reservoir at the beginning of the Pinglu Canal and the sea level of the estuary.

The lock at Madao Junction covers 185,000 square metres (2 million sq ft) alone, and requires 3.5 million cubic meters of concrete.

The design of the locks is also expected to save around 60 per cent of water needed, compared to traditional locks.

According to Pan, much of the work can only be figured out as the project progresses, with no reference model to follow, although new patents and construction standards are being developed.

“For example, it is required to open the lock’s door within one minute and close within half a minute. It needs huge innovative breakthroughs for both materials and technology,” Pan said.

To fight seawater erosion, builders also need to ensure the concrete used in the locks can last for over 100 years.

“From the preliminary design stage to the present, we have been carrying out research on the mix proportion of concrete with some domestic academicians to seek the final standard which could ensure our expected goals,” Pan said.

Chinese scientists are also conducting mathematical and physical simulations to project how the seawater would affect the relocation and modification of the local population’s drinking water sources and irrigation sites once the canal begins operation.

But while some expect the canal to facilitate more foreign trade, some question whether it will be another white elephant project.

Cargo throughput via Beibu Gulf Ports in Guangxi grew by 3.7 per cent, year on year, to 370 million tonnes last year, which was the 10th highest in the country.

It also handled 7.02 million twenty-foot equivalent units, up by 16.8 per cent year on year, ranking ninth nationwide.

The port offers 75 shipping routes, connecting all major ports in Asean member countries.

“Western regions, including those in Guizhou, Yunnan, and Sichuan provinces, may consider forming new industrial belts for the Asean market in the future,” said Peng Peng, executive chairman at the Guangdong Society of Reform, a government-based think tank.

But worries remain about the project due to supply chain and environmental factors.

“There has been a lack of enough cargo for Fangcheng Port, the biggest export port in Guangxi and those highways to West China,” said Raymond Xie, who works in the mining and logistics sector in Guangxi province.

“In addition, the canal’s upper reaches and water resources are far from abundant to match the needs of the canal.”

The environmental impact assessment report said the canal will pass through five protection zones for drinking water sources, occupy 849.18 hectares (2,098 acres) of farmland, 16.56 hectares of non-commercial forest and 13.9 hectares of wild mangrove forest, as well as having an impact on the aquatic ecosystem.

The report said the canal would be mainly used for shipping coal, minerals, cement, grains, mining and construction materials and containers.

Several Chinese environmental protection organisations have publicly debated and questioned the ecological impact of the canal.

The China Biodiversity Conservation and Green Development Foundation wrote to Guangxi’s ecology and environment department in June 2022, saying the project’s negative impact on the ecology, especially biodiversity, is unquestionable.

In addition, the project also threatens the freshwater resources of the basin, increases the risk of river shrinkage and siltation – the process of blocking something with sand or soil – and exacerbates regional flooding.

The regional environment watchdog replied that it will protect the ecology when developing the canal, without elaborating.

There appears to be a new wave of canal construction in China, according to Aster Lee, secretary general of the CrossBorder Environment Concern Association, with the momentum driven not by economics, but by local governments’ impulse for short-term gross domestic product.

“Pinglu Canal has its final end at a coastal estuary, home to some mangrove wetlands,” Lee said.

“When the canal is built and the dredging works are required for making shipping channels, there will be inevitable impacts on the nearby mangroves and the construction authorities need to take this into account.”