Cambodia’s relationship with China has deepened significantly, marked by the renaming of a major Phnom Penh road to ‘Xi Jinping Boulevard’ in May 2024. This symbolic gesture underscores China’s crucial role in Cambodia’s development, fueled by substantial economic and political support. While this partnership has driven Cambodia’s growth and stability, it also presents concerns that could have lasting consequences for the country’s future.
China has been a key investor in Cambodia’s infrastructure, funding projects like the Phnom Penh-Sihanoukville Expressway and the Siem Reap–Angkor International Airport. These projects have enhanced Cambodia’s connectivity and boosted its economy. However, this reliance on Chinese funding has sparked concerns about a potential debt trap. With over 40% of Cambodia’s US$11 billion external debt now owed to China, anxieties have risen about the country’s ability to manage its debt burden. The U.S. government has raised alarm about China’s Belt and Road Initiative, suggesting it could lead to countries losing control of strategic assets as collateral for debt repayment. The example of Sri Lanka, where a Chinese state-owned enterprise leased the Hambantota International Port for 99 years in 2017, is often cited as a cautionary tale.
Despite these concerns, Cambodian Prime Minister Hun Manet has defended the use of Chinese funding, highlighting Cambodia’s annual budget laws that impose clear debt limits, assuring the country’s ability to manage its debt responsibly.
Sihanoukville, a key area for foreign investment in Cambodia, exemplifies the complex impact of Chinese investment. The Sihanoukville Special Economic Zone, with the potential to house up to 300 factories and create 100,000 jobs, has significantly boosted economic growth. However, this influx of Chinese investment has driven up real estate and land prices, benefiting foreign investors and migrant workers, but displacing local businesses. By 2019, an estimated 90% of businesses in Sihanoukville were owned by Chinese citizens, illustrating the economic transformation and social tensions within the local community.
Beyond infrastructure and economic growth, China’s support extends to Cambodia’s tourism, education, and healthcare sectors. The Cambodia–China People-to-People Exchange Year 2024 aims to strengthen cultural ties and attract more tourists. Chinese funding has also supported the construction of educational institutions like the University of Kratie and the Cambodian–Chinese Traditional Medicine Research Centre, bolstering education and healthcare services. Additionally, China has committed to aiding Cambodia in landmine and unexploded ordnance removal, providing US$14.4 million in grants since 2018, leading to the clearance of over 107 square kilometers of minefields, benefiting local communities.
However, Cambodia’s close ties with China have geopolitical implications. Cambodia’s alignment with China’s stance on the South China Sea has strained its relations with ASEAN, highlighting regional tensions. The Funan Techo Canal project, which has raised concerns in Vietnam about potential water flow reduction in the Mekong Delta, exemplifies how economic cooperation with China can intersect with geopolitical challenges.
To ensure sustainable development, Cambodia needs to maintain control over its debt and diversify its investment sources. Establishing new partnerships with regional and global actors will be crucial in achieving balanced and long-term development. By adopting a balanced approach, Cambodia can maximize the benefits of its cooperation with China while minimizing potential risks, ensuring continued growth and regional stability. This strategy is essential for Cambodia’s future and for maintaining stability in the broader Southeast Asian region.
