Dec
We have covered geopolitical entities with a broader scope here on ChinaFund.com (the ASEAN, that you can read about by clicking HERE, and the even broader APEC, analyzed through an article you can access by clicking HERE) and it should be obvious why those are relevant to the average China-oriented investor.
What about “narrower” ones such as the Lancang-Mekong Cooperation (abbreviated LMC), are they worth being taken into consideration or would you be digging too deep by also factoring them in?
In our opinion, the answer is clearly affirmative. While the LMC may not be the most globally-relevant variable out there, it is most definitely of a significant regional importance in light of the fact that we are dealing with over 200 million people and an area of almost 800,000 square kilometers.
To be more precise, “Lancang” and “Mekong” (the name Lancang is used in China, whereas it tends to be called Mekong after flowing downward from the Yunnan Province) are two names for the same river, one that let’s say acts as an important geographical communication vehicle between the Indo-China Peninsula and China. Length-wise, we are dealing with almost 5,000 kilometers and economically-speaking, the fact that the five Lancang-Mekong countries (Vietnam, Cambodia, Thailand, Myanmar and Laos) have a combined GDP which exceeds $600 billion speaks for itself. Especially if we also include the GDP of China in the equation, as one would expect.
Furthermore, the Lancang-Mekong region can most definitely be considered a high growth one, with an average annual GDP growth rate in the 7% area. Needless to say, we have six countries which do not find it difficult to identify common denominators, whether we are referring to culture-related ones, geopolitical interests or economic goals.
As a result, it made sense for a more formalized cooperation to eventually emerge.
Back in 2012, this is precisely what happened, with Thailand making it clear that closer ties and a coherent regional diplomatic framework would be not just useful but downright necessary. China was willing to embrace this initiative, with the premier of China putting forth the Lancang-Mekong Cooperation Framework two years later, at the 2014 China-ASEAN Summit. Another two years later, the very first Lancang-Mekong Cooperation event was held in China, with a “shared river, shared future” theme which revolved around exploring cooperation possibilities.
In the spirit of tradition when it comes to Chinese diplomacy, the Lancang-Mekong Cooperation is governed by geopolitical pragmatism and calculated progress. In other words, it aims to increase economic activity and boost cohesion without stepping on the toes of broader organizations. On the contrary, the Lancang-Mekong Cooperation is in line with the United Nation’s 2030 agenda with respect to achieving “South – South” cooperation and with the ASEAN community building efforts.
Is the Lancang-Mekong Cooperation a geopolitical love story?
Most definitely not, as tends to pretty much always be the case in the oftentimes murky or “grey area” world of (geo)politics. Leaving rhetoric which involves peaceful cooperation aside, the broader China – ASEAN problem areas such as the South China Sea situation remain and for objective reasons, are not likely to simply disappear anytime soon. However, even in light of hot sports such as the South China Sea or some experts might say especially because of them, the fact that regional entities which facilitate dialogue exist can and should be considered a positive development. Whenever we are referring to geopolitical situations, “volatility” is the operative word and assuming that complex relationships between sovereign nations can be simplified to the point of making them straightforward would be overly optimistic at best and childish at worst.
At the end of the day, economic factors prevail and will most likely continue to prevail. Leaving more or less revisionist disputes aside, the fact remains that we are dealing with a regions that boasts an impressive combined GDP, with this fact alone making it “relevant” for lack of a better term. Furthermore, perhaps the most important Lancang-Mekong Cooperation common denominator revolves around just how growth-hungry the six nations involved are. This is because the high combined nominal GDP story only paints a partially accurate picture of reality. The GDP per capita data completes this narrative and makes it clear that despite being extremely strong from a nominal GDP perspective, the average citizen affected by the Lancang-Mekong Cooperation still has tremendous catching up to do before he or she can even contemplate the perspective of eventual parity with the West.
However, once (or, of course, IF, in light of the fact that few things are certain in the world of geopolitics) things get even remotely close to the parity dimension, the Lancang-Mekong Cooperation region would end up being multiple orders of magnitude more dominant from a nominal perspective as well. As such, the conclusion of this article is relatively simple: the Lancang-Mekong Cooperation represents an already economically potent region which, if the current growth rate dynamic is to be considered relevant, is poised to become even more dominant if/once the GDP per capita gap with the West is also filled. For this reason alone, as an investor with a China-oriented perspective, ignore the Lancang-Mekong Cooperation at your own peril.