China and the Mekong River Disputes: Can a New Framework Bring New Compromises?

Sustaining approximately 284 million people, the Mekong River is a transnational river flowing through China, Myanmar, Laos, Thailand, Cambodia, and Vietnam. This waterbody has been the subject of continued tensions between states and carries wider implications for international relations even today. For instance, while Vietnam’s currency practices led to tension with the United States under the previous administration, U.S. Ambassador to Vietnam Daniel Kritenbrink signaled an improvement in bilateral relations at the Hanoi briefing that took place a few days ago. The U.S. can potentially take advantage of the antagonistic Sino-Vietnam relationship over the Mekong River and tuck Vietnam under its wing. Vietnam is a key player in the U.S.’s Indo-Pacific strategy. There is ongoing debate regarding the effects of China’s damming of the Mekong River, and from Vietnam’s general perspective, the damming, along with years of climate change, contributed to “its worst drought in 90 years” in 2016 and damaged rice crops in 2019. Currently Laos holds similar concerns. Just days ago, reports speculate that Chinese dams are releasing Mekong waters during the dry season, negatively impacting the farming and fishing industries in Laos. As different countries along the Mekong view the damming from different angles, debates over river use have seeped into issues related to national security in recent years.

A lack of a streamlined, collaborative effort on behalf of the involved countries led to the creation of the China-led Lancang-Mekong Cooperation (LMC) framework in 2016. The intention was to resolve some of the implicit problems caused by the absence of strong international legal norms and enforcement mechanisms. How should the LMC developmental logic be analyzed? While critics may view it as doomed for failure, is this a fair analysis?

A Water Problem

For the over 200 transnational rivers such as the Mekong River, the International Law Association codified the water use law as the Helsinki Rules on the Uses of the Waters of International Rivers, which read as the following:

“Each basin State is entitled, within its territory, to a reasonable and equitable share in the beneficial use of the water of an international drainage basin.”

Nevertheless, the Helsinki rules remain a soft law — a law that has no legal bearing. There are three key features, which are unique to the geological, hydrological, and economic conditions of the Mekong River and its riparian countries, that further convolute inter-state cooperation. First, the relatively large number of riparian countries through which the Mekong passes leads to high transaction costs. The source of the Mekong River is in Tibet, China, where it is known as the Lancang River. The river flows south, passing through Myanmar, Laos, Thailand, Cambodia, and Vietnam, in this order. The sheer number of riparian countries dictates that any successful negotiation requires significant concessions, amassing a broad range of national interests. The showdown between the multitude of interests tends to impede progress.

The second key feature that creates further hurdles to collective decision-making is the seasonal hydrological nature of the Mekong River. The annual southwest monsoon that takes place between June and October results in a flood pulse, which creates a seasonality between the flood season and the low-flow season, due to variation in water flows. Most of the lower Mekong countries — all countries mentioned above excluding China — flourish on the seasonality of the Mekong, as the flood pulse of Mekong is critical to maintaining prolific fisheries. On the other hand, China prefers a more stable river flow to maintain stable electricity generation via controlling hydropower dams. The divergent needs on the seasonality of the river create fundamental conflicts.

Third, riparian countries have divergent economic goals regarding the Mekong river. Hydropolitical tensions are heightened by different levels of development within a watershed. For the Mekong region, countries are at different stages of economic development, implying that their developmental goals concerning the river have less overlap. For instance, agriculture-focused countries prefer a more stable river flow; however, as mentioned above, countries that depend heavily on fisheries still prefer the natural pulse of the flood. Countries’ different utilization preferences for the Mekong River easily result in the following scenario: one country’s behavior creates externalities in trying to satisfy its development goal, often negatively affecting downstream countries. This remains a pertinent issue, as China, the upstream country, wields control over downstream countries’ river use. 

Fundamentally, two trade-offs summarize the conflict surrounding the Mekong River. (1) The trade-off between national interests, where an upstream country’s decision would inevitably have significant consequences on its downstream riparian neighbors. (2) The trade-off between developmental goals, which are divergent and result in clashing expectations on how the river should be governed. Without cooperation, these two fundamental trade-offs will persist and disproportionately favor the upstream countries.

The Lancang-Mekong Cooperation Framework

Mekong River Commission

In order to coordinate the water resource allocation and address these two trade-offs, regional cooperation emerged — the Mekong River Commission (MRC) came along in the 1990s. The MRC includes lower Mekong countries except for Myanmar: Cambodia, Laos, Thailand, and Vietnam. From its inception, the MRC largely played a “consultative, facilitation, and information gathering” role. Many observers have expressed frustration with the limited scope of the MRC, as it hardly has any political authority or resources to enforce its vision. However, I would argue that the MRC has an indispensable role in coordinating the countries, and paving the way for future collaboration.

The main contribution of the MRC is a unified data collection system. The MRC collects extensive hydrological, biodiversity, water quality, and economic data along the Mekong River. This unified data collection platform is important, as these data provide a way to accurately calibrate the future impact of any government programs. Out of all international water disputes, the Mekong River is the only international water body that does not suffer from data disputes. This offers further proof that the MRC has contributed at least marginally in stabilizing the situation.

Lancang-Mekong Cooperation Framework and Case Applications

After its founding in 2016, the China-led Lancang-Mekong Cooperation Framework (LMC) declared three cooperation pillars: political and security issues; economic and sustainable development; and social, cultural, and people-to-people exchanges. In the 2nd Communique, the LMC further specifies five key priority areas: interconnectivity, production capacity, cross-border economic cooperation, water resources, agriculture, and poverty reduction.

The MRC had originally started with small-scale cooperation without touching the distributional structure within each country. Adding to the data collection and consultation work that the MRC specialized in, the LMC framework provided concrete opportunities for countries to “build towards ever-increasing integration.” The MRC had introduced the concept of creating multi-resource linkages in order to transform each country’s domestic incentive structure. It essentially consists of forming interest groups that transcend state boundaries, as resource linkages benefit certain groups that are not defined by state lines. The Lancang-Mekong Cooperation Framework planned programs to address these linkages.

What do the specific incentive structures of China and the lower Mekong countries look like? How do planned projects fit into this narrative? 

Chinese Electricity Market Integration with Lower Mekong

Since the 1980s, China has built 11 large hydropower dams on the mainstream of the Lancang River. These six dams are generating over 15,000 megawatts of electricity per year. Currently, this electricity is mostly transferred to the Southeastern seaboard cities such as Guangzhou, where demands are high and resources to produce electricity are insufficient. Since China’s corporate reform in 2002, the monopoly of the State Power Corporation was restructured to promote market competition. Under this motivation, the corporate owner of the Lancang cascading dams, Huaneng Company, is still seeking investment opportunities to finance hydropower dams in the lower Mekong countries, while importing a portion of the generated electricity back to China to meet the increasing power demand.

Lower Mekong Countries’ Demand for Hydropower Investment

Over the past few decades, the lower Mekong countries have experienced high economic growth. This creates more demand for power consumption. Yet, the average per-capita power consumption is still only two-thirds of the average for developing countries: Power poverty is prevalent in this region. One solution entails capitalizing on the Mekong River’s hydropower potential. According to the State of Basin Report, the estimated hydropower potential is around 30,000 megawatts, a sizable contribution to the 100,000-megawatt total power demand, forecasted for 2020. 

To finance these hydropower construction projects, many countries looked to China for financial and construction support. As for 2013, China financed, developed, and constructed over 53 dams in Myanmar, Laos, Cambodia, Vietnam, and Thailand. Moving forward, the LMC delineated plans to advance the progress of power grid integration among Lancang-Mekong countries, “toward the establishment of an integrated regional power market.”

Data Sharing

Though the MRC’s data collection system monitors all conceivable aspects of the Lower Mekong Basin, one uncontrollable variable remains — upstream water control in China. From the outset, it should be made clear that Lancang, or the upper Mekong, only contributes to 16 percent of the total water flow in a year. The majority of water comes from tributaries of the Lower Mekong Basin, especially during the flood season. That said, during the dry season, this composition shifts slightly — snowmelt water constitutes a larger share of the water flow when rainfall lessens — and China’s decision to withhold or discharge water is more heavily felt by the Lower Mekong countries. 

China does not have an incentive to share water flow data with lower stream countries. However, transparency is critical in forming mutual trust with Lower Mekong countries, and sharing hydrological and hydropower operational data is the first step toward fostering a long-term partnership.

Hydrological modeling has confirmed that the upper-stream hydropower dams lead to a significant increase in average discharge during the low-flow season, and a far smaller decrease during the flood season. These changes will shift the timing of seasonal flows and affect dry season and flooded areas, all of which impact the productivity of fisheries. To address this, the LMC five-year plan calls for strengthening data and information sharing, and deepening Lancang-Mekong river flood and drought disaster emergency management.

Collaboration: Looking Forward and Seeing the Big Picture

While China has tested out the waters to measure other Mekong River countries’ bottom lines in face of China-instigated negative externalities, it actually does have a broader economic incentive to maintain amicable-enough relations with Lower Mekong countries for the future of the productivity structure. With increasing costs of domestic labor, China is on the trajectory of moving up the global value chain. China is gradually moving away from labor-intensive manufacturing to capital and knowledge-intensive industries. In order for China to shift the lower rungs of its supply chains to its lesser-developed neighbors, it has the incentive to support these countries’ production capacity and lower trade & institutional barriers.

However, as many other Mekong River countries rely on China for infrastructure assistance and financial aid, China can leverage this complex system of reliance to pursue its own goals with the Mekong River. The line between fulfilling national energy interests and sustaining a positive relationship with its Southeast Asian neighbors is still being drawn. The LMC framework has moved the disputes in the right direction, through the effort to establish convergent interests across the Mekong countries. The new programs have shown initial success in seeking out areas such as power grid integration for cooperation. Moving forward, the member countries should set up a more transparent dispute settlement mechanism to use when conflict arises, such as the disagreements surrounding Chinese dams and downstream Vietnamese and Laotian farms and fisheries. 

Image Source: Associate Press/Eugene Hoshiko

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Chi (Will) Gao

Chi Gao is a second-year MCEPA student with a concentration in Chinese Economics at the School of Global Policy and Strategy. He graduated from UC San Diego with a joint major in Mathematics and Computer Science. His research interests include the evaluation of disruptive technologies, application of Geographical Information System in Political Science, and the interaction between China’s political economy and its overseas investment.

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