If you want to eat in the northern Lao town of Boten on the border with China, you better have some yuan on you.

Boten is one of the cities that have been so changed by China’s Belt and Road Initiative (BRI) that the yuan is now its main currency of trade. Even utility companies expect payments in yuan, rendering the Lao kip almost obsolete in this town.

But the currency isn’t the only Chinese characteristic of the town — it is also increasingly populated by many from across the border hoping to benefit from the massive development projects under the BRI, China’s global infrastructure investment drive and the centerpiece of President Xi Jinping’s foreign policy.

Indeed, Boten has had a face-lift since Chinese money started flowing in. It now has a cluster of skyscrapers taller than 100 meters each, the kind of buildings barely seen even in the country’s capital, Vientiane.

Jua, a 24-year-old truck driver, feels he has been “kept alive” by China. He is paid in yuan every month by a Chinese cargo owner. He expects his work to increase once Beijing terminates its zero-COVID policy. With domestic industry still underdeveloped, his financial well-being, like many others’, depends greatly on Chinese businesses.

Despite all the hype about the railway line, there are signs that the economic benefits are not measuring up to expectations. When Nikkei Asia visited a logistics center in a Vientiane suburb called Thanaleng Dry Port, not many containers were observed within the 60-hectare facility.

Although no numbers have been released, an official Nikkei spoke to in September said there were only two trips per day on average between Kunming and Vientiane, and only around 6,000 containers were handled at the dry port in August, about 20% of the original estimate.

The principal factor behind the disappointing performance is clearly the Chinese government’s zero-COVID policy, characterized by lockdowns, mass testing, strict scanning of health codes and travel restrictions.

Another factor limiting demand for the cargo service on the China-Laos Railway line is a lack of transparency in charges, which allows brokers to enforce high fees. This has turned off many cargo owners.

For Laos, the stakes are high. The rail line was built by a joint venture between Lao National Railway Authority and three Chinese companies. Loans from the Export-Import Bank of China financed some $3.5 billion, nearly 60%, of the total construction cost of $5.9 billion.

The Lao government claims it will not incur massive debts from the project as it had not provided any loan guarantees. But the government cannot allow the railway company to go bankrupt because of its ambition to use the line as a springboard for becoming a transport hub between Southeast Asia and key economies such as China and Europe.

As a result, the Lao government is likely to incur contingent liabilities, or liabilities that may occur depending on the outcome of an uncertain future event, according to Kenichiro Yamada, representative of the Vientiane office of Japan External Trade Organization. This view is shared by many observers.

Laos’ total public debt was equivalent to 88% of the country’s gross domestic product as of the end of 2021, according to data provided by the World Bank and other organizations. The country’s foreign debt totaled an estimated $10.4 billion, with about half owed to China.

Like many others, the Lao economy has been hit hard by the pandemic. In addition to rising inflation and the weakening of its currency, weak demand for rail cargo is raising concerns about a debt crisis for the underdeveloped Southeast Asian nation.

Some analysts are predicting that the government will be forced to sell off important assets, as it is already using income from rare metal mines as collateral for the financing of the railway business.

Toru Nishihama, chief economist at Dai-ichi Life Research Institute, warned that the Chinese side could end up controlling the entire stake of the joint venture, adding: “China may be able to move the trains freely for its own purposes, including military usage.”