Chinese investment strains Cambodian society

Chinese investment strains Cambodian society

The past decade has witnessed an unprecedented and massive influx of Chinese investments and tourism into Cambodia. The capital inflow and rising visitor numbers have been both beneficial and disruptive for Cambodia's economic development and social cohesion.

Chinese investments have impacted Cambodia's domestic politics and foreign policy in ways that have facilitated the country's drift toward autocratic rule. They also appear to be leading to far-reaching environmental and sociocultural changes.

The experience offers valuable lessons for other countries in Southeast Asia, and highlights an urgent dilemma for the government and society alike.

Relations between Cambodia and China gained momentum after the two countries established a comprehensive strategic partnership in 2010. At the heart of the relationship is Phnom Penh's close embrace of China's Belt and Road Initiative. There has been remarkable progress in infrastructure development throughout the country under BRI since 2013, such as the Chinese-funded Sihanoukville Special Economic Zone and the Phnom Penh-Sihanoukville Expressway, on which construction began in March under a build-operate-transfer scheme.

In the process, China has replaced Japan as Cambodia's largest foreign direct investor and become the country's closest ally. Beijing has financed seven hydropower dam projects that are collectively capable of producing half of Cambodia's entire electricity needs. It has also constructed 3,000 km of highways and eight bridges since the mid-1990s. The Nikkei Asian Review has previously reported that Cambodia was planning to host Chinese military assets at a naval base.

Between 2013 and 2017, China invested $5.3 billion in Cambodia, or roughly $1 billion annually. In 2018, foreign direct investment inflows to Cambodia reached $3.1 billion, with China the biggest investor.

Bilateral trade amounted to $6 billion in 2017, with Chinese exports to Cambodia accounting for 87% of that figure, and China will seek to increase that to $10 billion by 2023, according to Prime Minister Hun Sen.

More recently, in early 2019, Beijing pledged an additional 4 billion yuan ($588 million) in direct aid to Cambodia over the next three years.

In other assistance offered as part of the regional Lancang-Mekong Cooperation initiative, China said it would import 400,000 tons of Cambodian rice in 2019, grant about $90 million in aid to support Cambodia's defense sector and provide assistance if Cambodia loses its preferential trade access to the EU market due to Brussels' concerns over human rights violations.

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