Chinese company in a major property project in Laos

A firm based in Shanghai has started construction on a US$1.6 billion property project in Vientiane, the capital city of Laos, boosting Chinese presence in the Association of South East Asian Nations' smallest economy.

A Chinese mall developer has begun construction on a $1.6 billion mixed use development in Vientiane, Laos. Brent Lewin / Bloomberg News

A firm based in Shanghai has started construction on a US$1.6 billion (Dh5.87bn) property project in Vientiane, the capital city of Laos, boosting Chinese presence in the Association of South East Asian Nations' (Asean) smallest economy.

Shanghai Wanfeng Group, the closely held developer of shopping malls in China, reached agreement with the Lao government in December last year to develop 365 hectares around That Luang Lake into a commercial, residential and tourist complex.

Construction began at the weekend, according to the Chinese official news agency Xinhua and the company's website.

Chinese firms, from dam builders to mall developers, are boosting investment in Laos, a new member of the World Trade Organisation with an economy that is forecast by the IMF to grow 8.0 per cent next year.

China CAMC Engineering completed the first phase of a $100 million residential project on a 1.6 kilometre section of the Mekong river waterfront in time to accommodate leaders attending the ninth Asia-Europe Meeting last month. Yunnan Provincial Overseas Investment, a Chinese government investment arm, is developing another property project in the city valued at $40m.

China's total investment in Laos is $3.3bn this year, making China the third-largest foreign investor in the landlocked nation of 6 million people after Thailand and Vietnam, Xinhua news agency reported citing the ministry of trade.

China's investments in Asean have increased 31 per cent in the first 11 months of this year, the ministry had said, without providing a detailed breakdown by countries.

The government of Laos, one of the few remaining one-party communist states, began decentralising control and encouraging private enterprise in 1986.

The results, starting from an extremely low base, were impressive - growth averaged 6 per cent per year from 1988 to 2008 except during the short-lived drop caused by the Asian financial crisis that began in 1997.

Lao's growth exceeded 7 per cent per year from 2008 to last year.

Despite this high growth rate, Laos remains a country with an underdeveloped infrastructure, particularly in rural areas.

It has a rudimentary, but improving, road system, and limited external and internal land-line telecommunications. Electricity is available in urban areas and in many rural districts.

Subsistence agriculture, dominated by rice cultivation in lowland areas, accounts for about 30 per cent of GDP and 75 per cent of total employment.

Economic growth has reduced official poverty rates from 46 per cent in 1992 to 26 per cent in 2010. Last year, GDP per capita was estimated at $2,800, up from $2,600 in 2010 and $2,400 the year before.

* with Bloomberg News and agencies