10 October 2019

China Becomes Cambodia's Closest Ally, Largest Creditor

China has entered Cambodia's developing economy and made some major investments. The Middle Kingdom is rapidly cementing itself at Cambodia's strongest foreign partner, and biggest investor.

Cambodia is located south of China, and the two are separated by Laos, Vietnam, and Thailand. Despite the lack of a land border, China is developing connections in Cambodia at both state, and private levels. Xi Jinping's Belt and Road Initiative (BRI—or One Belt One Road 'OBOR') is focused on creating a new trade route that spans Eurasia as a whole, and it appears that Cambodia plays heavily into his plans.

The old French port town of Sihanoukville has been ground zero for Chinese investment, and migration. Sihanoukville had been a quiet beach town where tourists could explore the old deep-water port and surrounding wildlife. Today it is home to Sihanoukville Special Economic Zone (SSEZ), which is a tax-free economic zone for China and Cambodia. There are more than 100 factories in the SSEZ, the majority of which are owned by Chinese companies.

China Investments in Cambodia's Future

Sihanoukville has added a substantial amount of infrastructure in addition to the SSEZ. Chinese companies have a preference for hiring Chinese workers, many of whom have relocated to the Sihanoukville area. It is now home to new hotels, entertainment venues, as well as housing for the Chinese nationals.

Overall 250,000 Chinese people account for 60% of Cambodia's foreign residents, although the actual number may be much higher. Over 78,000 Chinese nationals live in Preah Sihanouk province, which surrounds Sihanoukville, but only 20,000 have Cambodian work permits. The Cambodian government reports that as of July 2019, 2,700 Chinese nationals were deported, with the records beginning in 2014.

Chinese individuals seem to have every reason to feel at home in Cambodia. A lot has happened in Cambodia since the nation signed a strategic partnership agreement with China back in 2010.

Over the last decade, Chinese state loans have built seven hydroelectric dams that when combined provide half of Cambodia's electrical needs. A Chinese company is also investing in a new road that would connect the Cambodian Capital, Phenom Penh, to Sihanoukville. This adds to the 3,000 kilometers (1,864 miles) of highways and other infrastructure that China began building in the nation in the mid-1990s.

The returns have been good for Chinese companies, but the results for the average Cambodian have been less impressive. Due to the high amount of unskilled labor in the country, and the Chinese preference for imported labor, many Cambodians aren't getting much out of the newfound economic boom.

Most Cambodian People Get Left Out

There has been a concerted international effort to help Cambodia recover from the brutal genocide it experienced under the now-deceased communist leader, Pol Pot.

While the USA and E.U. Nations did a tremendous amount with the help of the U.N. in the 1990s, increased pressure on the Cambodian government over human rights abuses seems to have pushed the nation into China's orbit. The E.U. began the process of removing Cambodia from its Everything But Arms (EBA) program earlier this year over human rights issues, which is a dynamic that Cambodia doesn't have to face with China

Unlike Western investment, Chinese money isn't tied to any kind of human rights goals. Unfortunately for the average Cambodian, Chinese investment is becoming a closed loop that gives the lion's share of gains to other Chinese people.

While Chinese investment has flowed into public infrastructure, much has also supported the construction of hotels, resorts, and casinos that cater to the rising number of Chinese tourists. It is estimated that more than 3,000,000 Chinese tourists will visit Cambodia by 2020, up from 2,000,000 in 2018.

Bilateral trade between China and Cambodia has also risen in recent years. It was estimated to be worth around $6 billion USD in 2017, although 83% of that figure is comprised of Chinese exports to Cambodia. The level of disparity in the China / Cambodia bilateral relationship is noteworthy.

The Cambodian nation has received infrastructure investment, but the nation also has massive debts to China. For the average Cambodian, the uptick in Chinese investment has meant little if they live outside of an urban area. Cambodians aren't able to work in many of the Chinese factories, afford the new hotels, or even enter many of the new casinos.