CHINA and Vietnam are working on a possible significant upgrade of their underdeveloped rail links to boost a line that crosses Vietnam’s rare-earths heartland and reaches the country’s top port in the north, senior officials and diplomats said.

The talks are part of preparations for a possible visit to Hanoi in the coming weeks by Chinese President Xi Jinping, officials and diplomats said. The visit is set to further confirm Vietnam’s increasingly strategic role in global supply chains, as major powers including the United States vie to gain influence there.

Deeper trade ties and railways connections are expected to be discussed on Friday, as China’s top diplomat Wang Yi meets Vietnam’s Deputy Prime Minister Tran Luu Quang in Hanoi, diplomats said.

Vietnamese Prime Minister Pham Minh Chinh in a statement released last month called for the upgrade of the railway linking Kunming in southern China to Vietnam’s port city of Haiphong, after China’s Commerce Minister Wang Wentao made a rare visit to Vietnam.

China officials have stressed the importance of boosting infrastructure connectivity with its southern neighbour.

Vietnam already has rail connections to China, but the system is old with limited capacity on the Vietnam side. The two systems are also not interoperable at the moment, meaning that trains have to stop at the border where passengers and goods are transferred to domestic services.

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The upgraded railway would pass through the region where Vietnam has its largest deposits of rare earths, of which China is by far the world’s biggest refiner.

Vietnam is trying to build its own industry, in what is seen as a possible challenge to China’s dominance. But apparent internal fights have cast a shadow over these efforts.

Chinese and Vietnamese rare-earths industry experts last week discussed the possibilities of stronger cooperation on processing the minerals, according to Vietnamese state media.

It is unclear how much China would contribute to the upgraded railway track in Vietnam, and whether Hanoi would accept sizeable financing from Beijing on this.

The line could be seen as part of China’s flagship Belt and Road Initiative (BRI) which is supporting infrastructure investment across the world. But it is not clear whether it would be labelled as a BRI project, one diplomat said.

A strengthened railway link could also boost Vietnam’s exports to China, mostly of agriculture products, and boost Chinese tourism to northern Vietnam. It could further integrate the two countries’ manufacturing industries, which experts already consider symbiotic, with factories in Vietnam largely assembling components produced in China.

China is Vietnam’s largest trading partner, and so far this year also its main investor, taking into account investment from Hong Kong. This came as many Chinese companies moved some of their operations south amid trade tensions between Beijing and Washington.

Despite the booming economic links, the two communist nations are embroiled in a years-long maritime dispute in the South China Sea, and fought a brief war in the late 1970s. REUTERS