Pinglu Canal underscores China’s turn toward Southeast Asia

Beijing’s RMB 72.7 billion investment in the Pinglu Canal prioritizes geopolitical influence over direct financial returns. This project, completed in just four years, contrasts sharply with stalled Chinese-backed canal efforts in Southeast Asia. The canal’s domestic completion speed reflects China’s ability to mobilize resources internally, a capability not easily replicated abroad. It also shows the strategic importance of Southeast Asia as China's largest trading partner.

The Pinglu Canal offers a 560-kilometer shortcut, potentially saving companies RMB 5.2 billion annually. This will boost Beibu Gulf Port, which forecasts 200 million tons of incremental annual freight by 2035. However, Southeast Asian governments face a dilemma. They seek Chinese investment but are wary of becoming a dumping ground for Chinese industrial overcapacity, as seen with Hozon New Energy Automobile’s dormant factory near the canal.

The test for China’s overseas canal ambitions is Cambodia’s Funan Techo Canal. Despite recent financing from the Export-Import Bank of China, actual construction has not begun. If Cambodia mobilizes contracts and equipment by late 2026, it would indicate a shift in China’s ability to overcome external sovereignty and land rights hurdles. Otherwise, the Pinglu Canal remains an outlier in China’s infrastructure strategy.