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HENG, Pheakdey (2012), Cambodia–China Relations: A Positive-Sum Game?, in:
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Journal of Current Southeast Asian Affairs 2/2012: 57–85
Cambodia–China Relations: A Positive-
Sum Game?
Heng Pheakdey
Abstract: China has re-emerged to become a dominant foreign player in
Cambodia. Politically, Cambodia is one of China’s oldest and closest allies.
Economically, China is Cambodia’s top foreign investor, a major donor, and
an increasingly important trading partner. Culturally, Chinese values are
deeply embedded in many aspects of Cambodian society. However, China’s
dominance is surrounded by renewed controversies. While the government
warmly welcomes Chinese aid, saying that it comes with no strings attached,
many experts are concerned that China is providing aid for more nefarious
reasons. Critics also accuse Chinese investment and aid of having exacerbat-
ed corruption, weakened governance and harmed human rights, and of
ruining Cambodia’s natural resources and environment. With such contro-
versies, it is relevant and significant to assess the roles that China has played
and continues to play in Cambodia’s socio-economic development. Using
expert interviews, media analysis and an extensive literature review, this
paper uniquely contributes to the existing discussion on China–Cambodia
relations by closely examining the controversies of China’s investment and
aid, critically analysing China’s interests in Cambodia, and asking if the rela-
tionship between the two nations is a positive-sum game.
Manuscript received 1 August 2012; accepted 17 September 2012
Keywords: China, Cambodia, ODA, FDI, economic development, contro-
versy
HENG Pheakdey is the founder and director of Enrich, a lecturer in the
Department of International Studies at the Royal University of Phnom Penh,
a member of the Cambodia Research Group, and currently a doctoral re-
searcher at VU University Amsterdam, The Netherlands. His research inter-
ests lie in Cambodia–China relations, and in issues of water and energy,
poverty, education and youth development worldwide. More infos at
<www.hengpheakdey.com>.
E-mail: <hengpheakdey@yahoo.com>
58 Heng Pheakdey
1 Introduction
China’s global rise needs no introduction but the country’s increased influ-
ence in Cambodia, one of the world’s poorest countries, has provoked some
heated discussion. Although the presence of China in Cambodia is nothing
new, the extent of its current involvement in Cambodia’s politics and eco-
nomic development is staggering. In fact, Cambodia is one of China’s oldest
and closest allies. Sino-Cambodian cultural and commercial relations are
historic and can be traced back to eight centuries ago when a Chinese dip-
lomat paid a visit to Angkor City in 1296 (Zhou 2007). During this thou-
sand-year-old friendship, China’s foreign policy strategy toward Cambodia
changed from time to time. During the 1960s China lent its patronage to ex-
King Sihanouk, then from 1975 to 1979 China financially and politically
backed the Khmer Rouge regime led by Pol Pot, who was responsible for
the killing of 1.7 million people during his rule. China continued to supply
the Khmer Rouge with weaponry along the Thai–Cambodian border be-
tween 1979 and 1990, even after the regime fell.
After the first general election in 1993, Cambodia formed a coalition
government comprising the FUNCINPEC party led by King Sihanouk’s son
Prince Norodom Ranariddh and the Cambodian People’s Party (CPP), led
by Hun Sen, a former prime minister in the Vietnamese-installed People’s
Republic of Kampuchea during the 1980s. Prior to 1996, China provided
patronage to Prince Norodom Ranariddh but later withdrew its support
because of the prince’s close relationship with Taiwan. In 1997, Hun Sen
ousted Prince Ranariddh in a violent coup. Despite the international con-
demnation, China recognized the result of the coup and provided Hun Sen
with huge financial aid. Since then, a series of reciprocal high-level visits
between the countries have helped to strengthen the bilateral relationship.
Presently, the bond between Cambodia and China is closer and strong-
er than ever. China is Cambodia’s top foreign investor, a major donor and
an increasingly important trading partner. With 247,197 Chinese tourists
visiting Cambodia in 2011, China is also the latter country’s third-biggest
tourism market, after Vietnam and South Korea (Ministry of Tourism quot-
ed in TTR Weekly 2012). According to the Chinese Association in Cambodia,
there are about 500,000 Chinese and Chinese-Cambodians living in Cambo-
dia, where they are one of the largest and most visible ethnic minorities
(Radio Free Asia 2012a). Chinese-Cambodians play a prominent role in the
Cambodian business sector as well as within Cambodia’s political scene.
Mandarin Chinese is the second most popular language in Cambodia after
English. There are approximately 56 schools offering Chinese-language
classes to some 30,000 students nationwide (Xinhuanet 2011b).
Cambodia–China Relations 59
China is undisputedly playing an important political, economic and cul-
tural role in Cambodian society. However, China’s dominance is surrounded
by renewed controversies. While the Cambodian government warmly wel-
comes China’s aid, saying that it comes with no strings attached, experts
warn that China is providing aid for reasons other than being a nice neigh-
bour. Given China’s dominance and the controversies its involvement has
evoked in Cambodia, some key questions are being asked: How is China
impacting the socio-economic development of Cambodia? Will the Cambo-
dia–China relationship result in a positive-sum game? What roles will China
play in Cambodia in the future? This paper aims to shed some light on these
questions.
The discussion in this paper is based on 15 in-depth interviews, a com-
prehensive content analysis of more than one hundred newspaper and mag-
azine articles on China–Cambodia relations, and an extensive review of the
literature on China’s foreign policy, investment and aid motivation, and
economic condition. The interviews were conducted with experts from
relevant government institutions as well as local and international organiza-
tions and thus represent the perspectives of different stakeholders. Unfortu-
nately, the author’s repeated requests for an interview with the Chinese
embassy were rejected, so Chinese media outlets were analysed instead in
order to indirectly represent China’s views. The interviews were conducted
in Cambodian and were translated by the author himself. Data from multi-
ple sources have been triangulated to enhance the reliability of the paper.
2 The Extent of China’s Involvement
In recent years, China has emerged as a major foreign player in Cambodia.
Prime Minister Hun Sen once said Cambodia’s strong economic growth in
past years has owed a great deal to China’s investment and steady technical
and financial assistance (China Daily 2012a). This section illustrates the role
of China as a top foreign investor, an important trading partner and a major
economic and military donor in Cambodia and discusses the distinctive
characteristics and controversies of such investment and assistance.
2.1 China: A Prominent Foreign Investor
Foreign direct investment (FDI) inflows are seen as a main driver of eco-
nomic development and liberalization in Cambodia. After the restoration of
peace and stability in 1993, Cambodia started to receive inflow of FDI and
has since been a popular destination for foreign investors from China, South
Korea, the United States, Malaysia and Thailand due mainly to its unex-
60 Heng Pheakdey
plored natural resources, low labour costs and attractive investment incen-
tives. The investment projects approved rose steadily, with an annual aver-
age of 640 million USD from 1994 to 2005, and 5.3 billion USD from 2006
to 2010 (CDC 2012). According to the Council for the Development of
Cambodia (CDC, the highest decision-making body of the government for
private and public sector investment), by September 2011 China’s accumula-
tive FDI had reached 8.8 billion USD, making it the largest investor in the
kingdom,1 followed by South Korea (4 billion USD), Malaysia (2.6 billion
USD), the United Kingdom (2.3 billion USD) and the United States of
America (1.2 billion USD) (CDC 2012).
Table 1: Top Investors in Cambodia (Jan 1994–Sep 2011, in million USD)
Country 2006 2007 2008 2009 2010
2011
(Jan–
Sep)
1994–2011.9
Total Rank
China 717 180 4,371 893 694 1,147 8,866 1
South
Korea 1,010 148 1,238 120 1,026 134 4,027 2
Malaysia 28 241 3 7 167 231 2,609 3
UK 4 26 6 6 11 2,222 2,378 4
US 62 3 672 236 144 1,285 5
Taiwan 48 40 22 27 92 69 827 6
Vietnam 56 139 21 210 115 246 812 7
Thailand 100 108 74 178 2 0 746 8
Singapore 12 2 52 273 37 0636 9
Russia 278 0 103 235 0 0 618 10
Total 4,440 2,656 10,889 5,859 2,691 5,674 39,886 -
Source: Cambodia Investment Guide, Council for Development of Cambodia 2012.
Traditionally invested heavily in small-scale manufacturing and the garment
sector, China has now become a leading investor in natural resources and
the energy sector. It also invests diversely in large-scale infrastructure, agri-
culture, tourism, telecommunications and construction. An estimated 23
Chinese firms are exploring mineral resources, five are constructing hydro-
power dams, and hundreds more are investing in the garment industry (Peo-
ple’s Daily Online 2011b).
1 There are reasons to believe that Chinese investment in Cambodia might have been
misreported. Comparing the investment figures from different sources, the author
finds a huge discrepancy. He nevertheless acknowledges that China is one of Cam-
bodia’s major foreign investors.
Cambodia–China Relations 61
Figure 1: China’s Fixed Asset Approvals in Selected Sectors 1998–2008 (% of
Total FDI Fixed Asset Approvals in Each Sector)
Source: Ouch, Saing, and Phann 2011.
2.2 China: An Important Trading Partner
Since the ASEAN–China Free Trade Agreement2 was put into force in
January 2010, China has become the biggest trading partner and the num-
ber-one export destination for ASEAN countries. China’s trade with
ASEAN jumped sevenfold between 2000 and 2010, to 232 billion USD
(ASEAN 2012). The growth of trade between China and Cambodia is the
highest vis-à-vis the bilateral trade between China and any given ASEAN
country. Driven by imports of garment raw materials, machinery, motorcy-
cles, cars, foodstuffs, electronics, furniture, medicines and cosmetics, Cam-
bodia–China trade tripled to 2.5 billion USD in 2011 from 791 million USD
in 2009 (ASEAN-China Centre 2012). However, Cambodia’s exports (main-
ly agricultural products, rubber, fishery, timber and textiles) to China remain
minimal, standing at 184 million USD by the end of 2011 (ASEAN-China
Centre 2012). Thailand and the United States continue to be Cambodia’s top
trading partners, but China is predicted to surpass both countries in the next
decade. China and Cambodia have already pledged to double the trade
amount to 5 billion USD by 2017 (People’s Daily Online 2012).
2 The ASEAN–China Free Trade Area is the largest free trade area in the world in
terms of population, and third-largest in terms of nominal GDP (behind the Euro-
pean Union and the North American Free Trade Area). Under the FTA accord, the
average tariff on goods from ASEAN countries to China is reduced to 0.1 per cent
from 9.8 per cent.
62 Heng Pheakdey
Table 2: Cambodia’s Top Import and Export Partners 2007–2010 (in Million
USD)
Export Partners 2007 2008 2009 2010 Total
2007–2010
1. United States 2,363.1 1,970.9 1,552.8 2,183.6 8,070.4
2. Hong Kong, China 17.1 839.9 1,646.3 20.4 2,523.6
3. Canada 189.2 292.0 195.8 346.6 1,023.6
4. Germany 298.3 138.1 108.8 294.6 839.8
5. United Kingdom 211.7 155.7 179.7 315.0 862.2
6. Singapore 76.7 113.3 482.3 143.3 815.6
7. Vietnam 186.8 169.3 115.5 118.7 590.4
Import Partners
1. Thailand 1,491.1 696.9 464.8 2,574.4 5,227.2
2. China 969.4 934.9 881.3 1,482.0 4,267.6
3. Singapore 482.2 303.8 209.0 2,436.1 3,431.0
4. Hong Kong, China 673.3 589.6 484.2 645.4 2,392.5
5. Vietnam 1,145.2 471.0 493.5 507.2 2,616.9
6. South Korea 309.6 229.4 209.1 214.9 962.9
7. Indonesia 134.0 96.2 145.5 239.5 615.3
Source: Author’s calculation based on Asian Development Bank (ADB) key indicator 2011.
2.3 China: An Emerging Bilateral Donor
China has also been a major source of foreign assistance to Cambodia. In
1999 China gave Cambodia 218.3 million USD (200 million USD in interest-
free loans and 18.3 million USD in foreign assistance guarantees), one of the
largest aid packages that it had ever given to any country at the time (Long
2009). China became Cambodia’s biggest donor in 2009, pledging 257 mil-
lion USD, compared to 214 million USD from the EU, and 113 million
USD from Japan (Palit and Palit 2011). Most recently, Cambodia received
three aid packages from China in just three months. These include 70 mil-
lion USD in aid pledged by President Hu Jintao during a visit to Cambodia
in April 2012 (Yahoo! News Singapore 2012), a 20 million USD military aid deal
signed in May (VOA News 2012) and a 430 million USD loan signed in June
of the same year (The Phnom Penh Post 2012c). China’s accumulative official
development assistance (ODA) from 1992 to 2011 reached 0.86 billion USD,
accounting for 7.1 per cent of total ODA, making it the second-largest bilat-
eral donor, behind only Japan (CDC 2011).3
3 Caution should be used when interpreting the amount of China’s aid to Cambodia
reported by the media because statistics regarding Chinese aid are frequently mis-
quoted. For example, Voice of America wrote that “by mid-2006 China provided at
Cambodia–China Relations 63
Table 3: Disbursement to Cambodia (in million USD) for Selected Years and
Countries
Country/
Organisa-
tion
1995 2000 2005 2010 2011
(est.)
1992–2011
Amount % of
total
World Bank 29.6 32.69 37.83 56.91 95.97 795.07 6.6
ADB 37.86 51.13 89.39 76.285 149.72 1,209.15 10
EC 28.88 27.94 23.65 34.19 55.78 687.37 5.7
Japan 112.40 106.02 111.66 146.02 120.63 2,081.28 17.2
China 3.12 2.61 46.63 138.15 210.73 863.70 7.1
US 45.14 17.60 43.25 60.36 57.20 779.84 6.4
France 62.23 27.80 24.44 23.20 19.96 554.68 4.6
Germany 13.89 12.22 27.29 35.30 44.40 360.07 3
Total 513 456 609 1,074 1,235 12,131 100
Source: Author’s own compilation from the Cambodian Development Effectiveness Report
2007 and 2011.
ODA from China also has a number of distinct characteristics. Globally,
Chinese financial assistance falls into three categories: grants, interest-free
loans and concessional loans. As for Cambodia, the majority of China’s
ODA comes in the form of concessional loans, mostly earmarked for infra-
structure projects (24 out of 34 Chinese-funded projects listed in the CDC
database are concessional loans). It is not known for sure how much Cam-
bodia owes China. There are contrasting estimates on Cambodia’s debt to
China, ranging from 2 billion to 6 billion USD (The Phnom Penh Post 2012a).
Access to information concerning Cambodia’s debt to China was restricted,
even to members of parliament, according to Yim Sovann, a spokesperson
for the opposition party (The Phnom Penh Post 2012a). However, a joint re-
port by the International Monetary Fund and World Bank suggests that
China holds the largest amount in bilateral loans to Cambodia, comprising
66 per cent of Cambodia’s total debt at the end of 2010 (The Phnom Penh Post
2012a). Also, in comparison to other donors, China offers the least favoura-
ble loan conditions. Most Chinese loans have higher interest rates and
shorter amortization and grace periods (Table 4).
least 2 billion USD in grant aid and loans” (VOA News 2010), but the number far
exceeds even the total 0.86 billion USD of accumulative ODA from 1992 to 2011
recorded in the CDC’s report.
64 Heng Pheakdey
Table 4: Terms of Loans from China Compared to from Other Donors (for
Most Projects)
Country Interest rate Repayment period Grace period
China 2–3% 15–20 years 5–7 years
ADB 1.2% 30 years 8 years
World Bank 1.2% 40 years 10 years
Japan 0.01% 40 years 10 years
Source: Author’s compilation from interview with officials at the respective institution. Chi-
na’s figures were quoted from China’s Foreign Aid Policy Paper 2011.
Another distinctive feature of China’s ODA that has been widely discussed
is the so-called “no-strings-attached” policy. Unlike the traditional donors,
whose assistance always comes with strict reform requirements, China’s
ODA is believed to come with no conditions and is warmly welcomed by
the Cambodian government. Cambodia’s prime minister has repeatedly
praised China in public, saying that “China has a way of doing things. They
talk less but do more. Before anyone knows it, we get bridges, roads, etc.
They are all without conditions” (Prime Minister Cabinet Office 2009). The
same sentiment is felt at all levels of the government. A senior officer at the
Cambodian Rehabilitation and Development Board of the Council for the
Development of Cambodia said the following in an interview with the au-
thor:
In terms of ownership, China respects the receiving countries in
terms of how the money should be used. China listens to the receiv-
ing countries’ needs and lets them use the money without any condi-
tions. Another thing, China never regards itself as the donor. China
gives aid to Cambodia as a friend and on a solidarity basis (A senior
officer at the CDC, interview with the author on 9 February 2012).
While the governments on both sides claim that China’s financial assistance
packages are simply the actions of a benevolent, friendly neighbour, analysts
and observers believe China has a hidden agenda. Experts have no doubt
that China’s aid does come with strings attached, but they are just different
strings. For traditional donors, good governance, democracy and human
rights are very important, so their aid usually comes with conditions which
require the receiving countries to reform in those areas. China, on the other
hand, is not interested in those things and claims that it does not want to
interfere in the internal affairs of other countries, so its aid comes with no
reform pressure in those areas; instead, the conditions usually surface in the
form of political and investment favours. Dr. Chheang Vannarith, director
of the Cambodian Institute for Cooperation and Peace, told the author
Cambodia–China Relations 65
during an interview that China’s aid has won the hearts and minds of more
politicians than citizens:
There is no aid without any strings attached. But how they put the
strings on the politicians is different from putting the strings on civil-
ians. The West thinks about the general public because of their mind-
set of democracy and they believe that public opinion can shape a po-
litical system. This is the Western value so that’s why they care about
the general public. For China, they don’t care about the general public.
They care who makes the decisions and that is the politicians
(Chheang Vannarith, director of Cambodia Institute of Cooperation
and Peace).
China’s aid is also infamously known for its lack of transparency. It is not
known exactly how the money is utilized, and information regarding the
projects is not publicly disclosed. Researchers on this topic, even of Chinese
nationality, are usually not welcomed. As stated above, my requests for an
interview with the Chinese embassy were rejected, and my interview re-
quests at the Chinese Chamber of Commerce in Cambodia were likewise
denied. It should also be noted that China is still an observer in the annual
consultative group meeting of all donors in Cambodia. Questions are being
asked as to why China does not want to be a member of this group. “We
also don’t have a clear record of Chinese aid. When we ask the CDC, they
tell us one thing, but when we ask the Chinese embassy, they tell us another
thing,” says a former senior economist at the UNDP Cambodia office in an
interview with the author. Also, Chinese ODA is unpredictable and unsys-
tematic. Unlike ODA from the World Bank and Japan, China and Cambodia
have not yet established a clear mechanism for aid management. In most
cases, China’s assistance is unplanned and often provided based on the
Cambodian government’s request.
Japanese aid is predictable because we have a clear process of what to
do from the beginning until we get the response from Japan […]. Al-
so, Japan usually follows up for the entire project cycle. We need a lot
of time to discuss but when it comes to implementation it’s very sys-
tematic (Mr. Nhean Tola, senior programme officer at the Japan In-
ternational Cooperation Agency, interview with the author on 20 Jan-
uary 2012).
The World Bank is very strict with regard to the use of its money. Af-
ter the agreement has been signed, and after the procurement is com-
plete and the consulting firm has been selected, the money is trans-
ferred directly to that firm. The government doesn’t normally get the
money. We also hire international procurement agents to manage the
66 Heng Pheakdey
procurement activities. The implementing firm also needs to write re-
ports for the World Bank at different stages of the project. So it’s very
transparent (Mr. Chea Huot, a senior economist at the World Bank,
interview with the author on 12 January 2012).
The lack of transparency of Chinese aid is nothing out of the ordinary in
Cambodia. China’s ODA to other countries has also met similar criticism; as
Lancaster (2007) puts it, “China appears to administer foreign aid in an ad
hoc fashion, without a centralized system, foreign aid agency and mission, or
regularized funding schedule.” In April 2011, China published its first for-
eign aid document (also known as the White Paper) as an initiative to improve
transparency. However, the document is far from being comprehensive.
Important statistics such as the amount of annual aid flow to each country
are not available. Several observations can help explain the lack of infor-
mation disclosure of China’s aid. First, being a developing country that still
receives financial assistance itself, China does not want to be recognized as
the major ODA provider as it would be difficult to justify to the Chinese
people why it is providing aid to other countries while a large proportion of
the Chinese population is still poor. Second, not revealing too much infor-
mation can also help avoid questions from receiving countries. For instance,
questions may be asked about why one country gets more aid than another.
Third, China’s aid spreads across continents, and given its large territory it is
a real statistical challenge to keep records of the money provided by all the
different provinces and ministries across different portfolios.
2.4 China: The Biggest Source of Military Aid
In addition to the close economic relationship, Chinese–Cambodian military
cooperation has also tightened considerably since the late 1990s. China has
generously provided military assistance to Cambodia in various forms. For
example, in December 1999 China donated construction materials worth 1.5
million USD, including new barracks, ten jeeps, ten ambulances, and para-
chutes for the Cambodian armed forces (Marks 2000). Between September
and October 2006, China pledged assistance for Cambodian army human
resource training and the repair of military equipment, and gave Cambodia
six patrol boats to help combat drug- and human-trafficking (IntellAsia
2005). More recently, during talks between Cambodian Premier Hun Sen
and Chinese President Hu Jintao alongside the opening of the World Expo
in Shanghai in April 2010, China announced a new aid package comprising
257 new military cars, 50,000 uniforms, and 100 million CNY (15 million
USD) (Radio Free Asia 2010). In May 2012, Cambodia and China signed a
military cooperation pact in which China agreed to provide 120 million
Cambodia–China Relations 67
CNY (20 million USD) to Cambodia to build military hospitals and military
training schools for the Royal Cambodian Armed Forces and promised to
continue training Cambodian military personnel in China (Radio Free Asia
2012c). According to a senior official at the Ministry of Defence who asked
not to be named, China is the biggest source of military aid to Cambodia,
contributing more than 5 million USD a year and sponsoring an average of
40 Cambodian soldiers every year to study military strategy in China (News-
mekong 2005).
In sum, Cambodia is currently one of China’s closest allies in Southeast
Asia. The relationship between the two nations has reached a new peak with
closer ties in almost all areas of cooperation. Chinese Ambassador to Cam-
bodia Pan Guangxue once said, “China and Cambodia will always be good
neighbours, close friends, trusted partners and dear brothers” (The Phnom
Penh Post 2011). The dominant influence of China in Cambodia has sparked
heated discussions on China’s interests in this tiny country. The next section
elaborates on China’s underlying interests globally and then proposes some
hypotheses on its motives in Cambodia, specifically.
3 China’s Interests in Cambodia
The rise of China has become the topic of hot debate in recent years. Its
impressive economic growth, colossal foreign reserve, and rising investment
and aid to other countries have amazed the world, worried the West, and
spurred discussion on the motivation of its increased presence and influence.
In terms of investment, China has become the sixth-largest investor in the
world, having invested 68.81 billion USD in 178 countries across the globe
(UNCTAD 2011). With regard to official development assistance, China is
the most prominent emerging donor, having given a total of 40 billion USD
by the end of 2009 to 161 countries and 30 international and regional organ-
izations (People’s Republic of China 2011).
Attempts to pinpoint the real motives behind China’s rising investment
and aid have proven challenging due to the scale and diversity of its invest-
ment and assistance. A survey of more than one thousand Chinese firms
finds that the top five drivers of China’s overseas investment are 1) follow-
ing a “Go Global” policy, 2) seeking new markets, 3) pursuing advanced
technology, 4) reducing production costs and 5) benefitting from the prefer-
ential policy of the host country (Asia Pacific Foundation of Canada 2009).
Empirical evidence, however, is far less conclusive. Buckley et al. (2007) find
that Chinese firms tend to invest in countries with poor governance and
high political risk, but Cheung and Qian (2008) argue that quality of institu-
tion is not the main factor and suggest that Chinese FDI is attracted by a
68 Heng Pheakdey
potential host country’s natural resources. Cheng and Ma (2008) rule out
both factors as the explanatory variables. Some scholars argue that China’s
investment motivation cannot be explained by mainstream theories because
of its unique characteristics. The majority of China’s outward investment is
undertaken by state-owned enterprises (SOEs), so their activities have to be
in line with government policies, meaning their investment goal may be
defined by political motivations rather than driven by profit maximization.
With regard to aid, the Chinese government claims that its foreign aid is
used to help recipient countries strengthen their self-development capacity,
improve the livelihoods of their people, and promote economic growth and
social progress (People’s Republic of China 2011). However, scholars be-
lieve that China provides aid for reasons beyond those listed in the paper.
According to analysts, China’s ODA aims to secure natural resources, estab-
lish strategic diplomacy, and spread Chinese values (see Lengauer 2011; Lum
et al. 2011; Weston, Campbell and Koleski 2011).
Probing into China’s domestic situation and examining the sectors in
which Chinese investment is concentrated and the countries to which it
provides aid paints a pretty good picture of the real motives of Chinese
government. With an average annual growth rate of 10 per cent over the last
three decades, China is one of the world’s fastest-growing economies. It has
overtaken Germany as the world’s number-one exporting country and Japan
as the world’s second-largest economy. To sustain its economic growth,
which is necessary for this huge authoritarian state, there is one thing that
China needs the most: energy. China surpassed the US to become the
world’s largest energy consumer in 2010 and will likely remain in this posi-
tion for the next 25 years (IEA 2011). With rising demand for energy and
few natural resources back home, China needs to do whatever it takes to
secure energy from abroad. Thus, it is not surprising that China invested
102.2 billion USD from 2006 to 2010 in the energy and power sector in the
Middle East, Central Asia, Africa and Latin America. This investment
amount is the largest sum relative to all other sectors (Scissors 2011).
Currently, China depends on foreign imports for over 50 per cent of
the oil it consumes (Zhang 2011). Thus, China has, to a great extent, tried to
build good relationships with the leaders of many countries around the
globe through various means such as public diplomacy, large-scale invest-
ments, and no-strings-attached aid and debt cancellation to secure access to
natural resources. For example, Chinese Premier Wen Jiabao made an exten-
sive tour of Africa and offered 3 billion USD worth of credits to Angola,
China’s major oil supplier, to secure future reliable supplies (Asia Times
2006). To diversify its oil import (which mostly comes from the Middle
East), Beijing has also spent billions of dollars securing drilling rights in
Cambodia–China Relations 69
Nigeria, Sudan, the Democratic Republic of the Congo and Ethiopia (Asia
Times 2006). Second, in addition to energy security, food security may pre-
sent a potential problem for China in the future. China has 20 per cent of
the world’s population but only 8 per cent of the world’s arable land; this
makes feeding its people a real challenge. Although China is at present self-
sufficient thanks to its large agricultural outputs, with dwindling agricultural
land due to urbanization, industrialization,4 and the rising population,5 China
will become more dependent on imports to meet local demand. To illustrate
this, after having been a net food exporter for the previous two decades, in
2007 China became a net importer of food for the first time (see Figure 2).
In 2010, Chinese import of grain reached a record high 60 million tons, of
which 54.8 million tons were comprised of soybeans (60 per cent of the
world’s total) (People’s Daily Online 2011a). In this regard, it is reasonable to
believe that China is also looking for external food sources. Africa is one of
the most promising regions for China’s agriculture outsourcing thanks to its
abundant agricultural land. Chinese agricultural investment in Africa is cur-
rently concentrated in Sudan, Tanzania and Ethiopia although there are also
Chinese firms investing in joint ventures in the fish industry in Mozambique,
Namibia and Gabon (Naidu and Mbazima 2008).
Figure 2: Food Trade (in Billion USD), 1992–2010
Source: Huang 2011; Centre for Chinese Agricultural Policy.
4 According to Mr. Chen Xiwen, the top agriculture advisor to Premier Wen Jiabao,
China’s farmland has shrunk by 8.33 million hectares in the past 12 years due to the
construction of apartments and factories, desertification, and deforestation (The
Sydney Morning Herald 2012).
5 Under the medium-fertility scenario, China would reach a maximum population of
1.443 billion in 2030 (a 10 per cent annual increase for the next 25 years) followed
by a long-term population decline (Wei and Liu 2009).
70 Heng Pheakdey
Third, China is evidently seeking to expand its export market. Serving as the
factory of the world, China’s exports play a crucial role in its economy, aver-
aging 47.8 billion USD annually (1990–2012) and accounting for almost 40
per cent of its GDP (Trading Economic 2012). In May 2012, China’s ex-
ports of office machines and data-processing equipment, telecommunica-
tions equipment, electrical machinery, and apparel and clothing were worth
181 billion USD (National Bureau of Statistics of China 2012). Currently,
China exports mainly to the European Union, the United States, Hong
Kong, ASEAN, Japan, South Korea, India, Russia and Taiwan, but in order
to sustain its economic growth China is also on a quest for new export mar-
kets for its products. Given its combined population of one billion people
and its rapid economic growth, Africa is a promising market for China to
tap into. Africa accounted for 3.8 per cent of China’s exports in 2011, an
increase from 2 per cent in 2002 (Times Live 2012). Latin America, Southeast
Asia and Australia are also emerging export destinations for China.
Figure 3: Imports and Exports (2006–2011)
Source: National Bureau of Statistics of China 2012.
Fourth, China is using the charm offensive to attract more supporters and
allies. Having a permanent seat on the United Nations Security Council, a
nuclear-armed military, a continental-sized territory, a massive foreign re-
serve, and being the major manufacturing hub of the world, many believe
China will become the next global superpower. In fact, some scholars pre-
dict that China will overtake the US to be the world’s foremost military
Cambodia–China Relations 71
superpower within 20 years and will become the world’s largest economy by
2021 (CNN 2011). Although some would contest the timeframe of the pre-
diction, the consensus is that China will get there sooner or later. To ensure
that the transformation to superpower is peaceful, China needs a lot of in-
ternational support. Therefore, there is little doubt that one of China’s mo-
tives for its increased presence abroad is to make more friends and gather
support for its imminent rise. China has been using its consultative, non-
interference and no-strings-attached policies to develop political and eco-
nomic ties with many countries, including those viewed as rogue states by
the United States.
Finally, China has used cultural tools within its public diplomacy to win
more friends and expand its influence. For example, China has created vari-
ous scholarship programmes to attract foreign scholars and students to
study, research, and work in China. Serious effort has also been made to
promote the learning and teaching of the Chinese language (Mandarin)
worldwide. One example of such an effort is the establishment of the fa-
mous Confucius Institutes around the world, which offer Chinese-language
training and promote Chinese culture through the organization of various
activities involving music, cooking, and lectures on Chinese history and
society. As of 2011, there were 320 Confucius Institutes in 96 countries with
over 230,000 registered students globally, and China plans to increase the
number of such institutes to one thousand by 2020 (Shen Siow 2011). Hu
You Qing, deputy to the National People’s Congress once said,
Promoting the use of the Chinese language will contribute to spread-
ing Chinese culture and increasing China’s global influence. It can
help build up our national strength and should be taken as a way to
develop our country’s soft power (Kurlantzick 2007).
Obviously, the Chinese government has successfully established a range of
institutions and a solid infrastructure to promote Chinese culture around the
world.
To sum up, it is true that the increase in China’s presence abroad is due
partly to the “Go Global” policy, but China’s agenda is about more than
increasing investment, pursuing product diversification, improving the level
and quality of the projects, expanding financial channels, and promoting
brand recognition of Chinese companies. An analysis of the domestic socio-
economic and political situation in China suggests that its increasing influ-
ence overseas is based on at least four main motives: to secure natural re-
sources, particularly oil and food; to expand its export market to sustain
growth; to spread its cultural values; and to strengthen friendship and coop-
eration with world leaders using the charm offensive and public diplomacy
in order to gather support for its transition to superpower status. What
72 Heng Pheakdey
about China’s dominance in Cambodia? What does Cambodia have to offer
to China? In the subsequent paragraphs, I propose four hypotheses.
Table 5: China’s Interest in Cambodia
Interest Priority
Economic Secure natural resources Medium
Expand export market Low
Political Enhance regional security High
Seek support for “One China” policy High
Strategic Seek support at global arena Medium
Balance the US influence High
Ideological Spread Chinese culture High
Source: Author’s own analysis.
Politically, Cambodia is China’s ally. Cambodia – in particular, Prime Minis-
ter Hun Sen – has become one of ASEAN’s strictest adherents of the “One
China” policy and a vocal supporter of China’s 2005 anti-secession law6 that
Hun Sen describes as “highly necessary to the cause of China’s national
reunification” (People’s Daily Online 2005). Also, China can always count on
Cambodia’s full cooperation in dealing with its political resistance. For in-
stance, in December 2009, upon Beijing’s request, Cambodia decided to
deport 20 ethnic Uyghur7 asylum-seekers to China despite an outcry from
the international community (BBC 2009). In April 2012, President Hu Jintao
promised millions of dollars of aid and loans during his visit to Cambodia
right before the ASEAN summit that was chaired by Cambodia. In return,
he requested that the South China Sea dispute not be discussed during the
meeting. Experts believe that Cambodia’s membership in ASEAN is im-
portant for China to engage Cambodia in shaping regional actors to serve
the interests of China.
Economically, China has also benefitted from Cambodia. In return for
its assistance, Cambodia’s government has welcomed and facilitated Chinese
investment. Chinese FDI fixed asset approval rose sharply from just 105
million USD in 1998 to a staggering 4.375 billion USD in 2008 (CDC 2010).
Using Cambodia’s “Most Favoured Nation”, “Generalized System of Pref-
erences” and “Anything But Arms” status, Chinese garment factories were
6 Ratified on 14 March 2005, the law formalizes the long-standing policy of the
People’s Republic of China to use “non-peaceful means” against the “Taiwan inde-
pendence movement” in the event of a declaration of Taiwan independence.
7 Uyghurs are members of a Turkic-speaking ethnic minority living mostly in western
China. The 20 Uyghurs were seeking refuge in Cambodia after fleeing persecution
in a crackdown that followed riots in which the Chinese government reported that
at least 197 people were killed.
Cambodia–China Relations 73
able to bypass quotas and tariffs imposed by the US and the EU and export
their products to the world market.
Relatively speaking, Cambodia has fewer natural resources than Africa
or Central Asia, but this tiny country possesses an estimated 400 million
barrels of crude oil and three trillion cubic feet of gas (EIC 2008). Cambodia
also offers mineral resources, which is one of the few remaining underex-
plored (greenfield) areas in the world, and plenty of agricultural land. Invest-
ing in these sectors allows China to secure stable access to vital resources for
its domestic growth. In fact, Chinese companies have already been granted
land concessions and licenses to invest in mining, hydropower and agro-
industry in Cambodia. According to a report by the Cambodian Centre for
Human Rights (CCHR), 50 per cent of the land concessions granted since
1994 (4.6 million hectares) are in the hands of 107 Chinese firms (The Phnom
Penh Post 2012b). As mentioned previously, an estimated 23 Chinese firms
are exploring mineral resources (People’s Daily Online 2011b), five are con-
structing hydropower dams (People’s Daily Online 2011b), and 66 are investing
in agro-business industry (Hicks et al. 2009). It is not known for sure how
many Chinese firms are investing in Cambodia’s oil but in 2007 the China
National Offshore Oil Corporation (CNOOC) reportedly won the right to
drill in Cambodia’s offshore Block F, covering 7,026.7 square kilometres
(Xinhuanet 2011c).
China also sees Cambodia as a farming field. As mentioned above,
China is seeking external food sources to ensure its food security. With its
favourable climate and because less than 30 per cent of its total potential
arable land is currently cultivated (Yu and Diao 2011), Cambodia is promis-
ing for China’s agricultural outsourcing. Thus, it is not surprising that China
is the second-largest investor in agriculture with a share of fixed assets of
17.6 per cent from 2000 to 2010 (CDC 2010). There are already some visible
signs of China’s interest in Cambodia’s agricultural products. For instance,
in August 2011, the China National Food Industry Group signed an agree-
ment with the Cambodian agricultural firm Ly Ye Rubber Company to im-
port one million tons of cassava. In the same month, the Guangzhou branch
of the China Grain Reserves Corporation (Sinograin) also agreed to buy up
to 200,000 tons of milled rice per year from Cambodia (Xinhuanet 2011a).
Investments in these sectors allow China to secure important natural re-
sources to feed its own population.
Strategically, Cambodia occupies a unique geographical location vital
for China to strengthen its own security in Southeast Asia. China’s increas-
ing exports and insatiable demand for energy have driven it to pursue its
“string-of-pearls” strategy, a strategic move which involves establishing a
series of nodes (pearls) of military and economic power throughout a region,
74 Heng Pheakdey
often through gaining increased access to airfields and ports. Situated in the
centre of mainland Southeast Asia, the Cambodian port of Sihanouk Prov-
ince is a precious “pearl” among China’s “string of pearls” (see Figure 4). It
should be noted that China has already funded the renovation of the dock-
ing facilities at Ream and the port of Sihanouk Province. Access to these
ports provides an excellent base for projecting maritime power into the Gulf
of Thailand and the Straits of Malacca. Thus, Cambodia is strategically im-
portant for China to exert greater influence in Southeast Asia and to coun-
terbalance the power of the US.
Cambodian airfields could also make up for China’s lack of in-flight
refuelling capacity for warplanes providing maritime air cover. Such
bases would not only protect China’s interests, they would drive a
wedge both within ASEAN and between ASEAN and the United
States (US Major Paul Marks in his article in the US Army War College
Quarterly 2000).
Figure 4: China’s “String-of-Pearls” Map
Source: Map modified by the author; original map produced by Edgar Fabiano <http://en.
wikipedia.org/wiki/File:Collardeperlaschino.png>.
Culturally, China has also been trying to spread Chinese values in Cambodia.
By the end of 1960, Chinese had become the largest minority group in
Cambodia, the population of Chinese and Chinese-Cambodians numbering
approximately 425,000 at that time (Swann 2009). Although this number
dropped during the subsequent war and under the genocidal Pol Pot regime,
Cambodia–China Relations 75
ethnic Chinese have re-emerged as one of the most prominent groups in
Cambodia and play an important role in the business sector. There are now
about 500,000 Chinese and Chinese-Cambodians in the country, according
to the Chinese Association in Cambodia (Radio Free Asia 2012a).
The cultural influence from China has not been paid enough attention
to but it is prominent and can be witnessed in many aspects of Cambodian
society, including but not limited to language and education, food and eating,
media and entertainment, and beliefs and festivals. For example, Chinese
New Year is one of the biggest celebrations in Cambodia, with up to 80 per
cent of Cambodian people celebrating it every year (Xinhuanet 2012). Alt-
hough Chinese New Year is not officially recognized as a public holiday, a
number of schools, markets, businesses and government ministries are
closed during this event. Chinese food has become a common dish in most
Cambodians’ homes. I estimate that there are at least one hundred Chinese
restaurants in the capital Phnom Penh alone. Mandarin is the second most
popular language in Cambodia after English. As mentioned above, there are
approximately 56 schools offering Chinese-language classes to some 30,000
students nationwide (Xinhuanet 2011b). To further promote the Chinese
language, China has built a Confucius Institute in Phnom Penh to offer
Chinese-language programmes to Cambodian learners and training pro-
grammes for Chinese-language teachers (Xinhuanet 2010).
The popularization of the Chinese language in Cambodia far exceeds
that in any other Southeast Asian country. This feather in the cap of
Cambodia’s Chinese has made an enormous contribution to both glo-
rifying Chinese culture and developing the friendship between Cam-
bodia and China (Yan Tingai, a former Chinese ambassador to Cam-
bodia [Marks 2000]).
4 Discussion
Clearly, China is re-emerging as a prominent foreign player in Cambodia.
Because Cambodia’s geographical, natural, and cultural landscapes are con-
ducive to China’s rise in the region, the latter country has utilized its soft
power (diplomatic, economic and cultural) to increase its involvement in the
former country. China’s influence now runs deep in Cambodian society.
Politically, Cambodia is one of China’s oldest and closest allies. Economical-
ly, China is Cambodia’s top foreign investor, a major donor, and an increas-
ingly important trading partner. Culturally, Chinese values are deeply em-
bedded in Cambodians’ way of life.
So given the scale of China’s dominance in Cambodia, it has become
relevant and important to assess the roles that China plays in Cambodia’s
76 Heng Pheakdey
socio-economic development. As far as China is concerned, there are two
opposing points of view: One group believes that Chinese investment con-
tributes to Cambodia’s economic development and poverty reduction. For
instance, investment in the garment industry has boosted exports and gener-
ated local employment (Ouch, Saing and Phann 2011), and investment in
hydropower can potentially provide electricity to some, if not all, of the 78
per cent of the population who currently do not have access to reliable elec-
tricity (UNDP 2010). These investments may not empower all Cambodians
equally at once, but will contribute to everybody’s well-being through trick-
le-down effects in the long run. The government is also expected to benefit
financially through taxes and royalties from Chinese investment in mining,
oil and gas. Chinese aid for building roads, bridges and highways is also
expected to improve Cambodia’s physical infrastructure, contributing indi-
rectly to poverty reduction.
However, the other group argues that China’s unquestioning approach
to how its aid and investment money is used has exacerbated corruption,
deteriorated governance and human rights, and ruined Cambodia’s natural
resources and environment. For example, Chinese investment has been
repeatedly criticized for its lack of transparency, its human rights abuses, and
the environmental deterioration it has wrought. Human rights activists have
often implicated Chinese garment factories in the abuse of workers’ rights.
Issues such as involuntary unpaid overtime work, unauthorized deductions
from pay, and only rare allowances for sick leave are commonly reported
(Radio Free Asia 2012b). Chinese investment in massive agricultural and
forestry exploitation projects has also sparked controversies. For example,
the 200,000-hectare concession granted to Pheapimex, partnering with Chi-
na’s Wuzhishan, has displaced indigenous minority people who rely on the
forests for their traditional livelihoods (Global Witness 2009). Chinese hy-
dropower investment projects have also negatively affected the environment,
destroying the protected areas, forest biodiversity and wildlife habitats (Mid-
dleton 2008). Critics also argue that the lack of transparency and accounta-
bility in the management of Chinese aid will aggravate the existing wide-
spread corruption and poor governance.8 As Michael Sullivan (2009) puts it,
Chinese investment and aid, backed by China’s regional foreign policy
goals, may create new rent-seeking opportunities for powerful politi-
cal and economic networks within the Cambodian state, at the ex-
pense of the government’s reform agenda.
8 Cambodia ranks 164 out of 182 countries in Transparency International’s Corrup-
tion Perceptions Index 2011.
Cambodia–China Relations 77
The Cambodian government has warmly welcomed China’s involvement.
Cambodian Deputy Prime Minister Sok An told Chinese Ambassador
Zhang Jinfeng, “The more investments and tourists from China, the greater
the contributions will be to Cambodian economic growth” (People’s Daily
Online 2010). On another occasion, Cambodia’s Public Works and Transport
Minister Tram Iv Tek stated the following at the signing ceremony of the
infrastructure development Memorandum of Understanding (MoU): “So far,
China has built three bridges and 1,500-km-long roads for Cambodia, worth
nearly one billion US dollars. The Cambodian people and government will
not forget China’s help” (Xinhua 2010). Premier Hun Sen called China
“Cambodia’s most trusted friend”. He openly appreciated Chinese aid, say-
ing that it comes with no strings attached, unlike aid from the US and the
West, which often comes with stringent structural adjustment and reform
requirements.
China’s “unconditional” aid and inflow of large-scale investment are in
some ways weaning Cambodia off its dependence on the West, but experts
warn that too much reliance on any single country is unhealthy for Cambo-
dia. “China will play an even more important role but we still need tradition-
al donors,” said Chan Sophal, president of the Cambodian Economic Asso-
ciation, in an interview with the author. There are concerns about the loss of
independence and autonomy in decision-making if Cambodia’s government
is to rely solely on China. Past experiences have already shown how China
could influence Cambodia’s actions and decisions, especially with regard to
diplomatic and political matters (elaborated in the previous section). In fact,
most recently, Cambodia has been harshly criticized for its unjust chairman-
ship of the ASEAN meeting in July 2012 with regard to the South China Sea
dispute. Meeting delegates described Cambodia as “the worst chair” and said
China had effectively bought Cambodia’s loyalty (Reuters 2012). Cambodia
might also risk losing face and trust within the international community, and
its role in the ASEAN community might be marginalized if it continues to
give China special treatment.
This time around, Cambodia, as the ASEAN chair, has taken an un-
compromising stand on the issue of the South China Sea. Instead of
trying to find common ground among all concerned parties, as the
ASEAN chair has done in the past, the chair decided to put its na-
tional interest ahead of the grouping’s solidarity. In the long run, it
will backfire on Cambodia and ASEAN as a whole (The Nation 2012).
This situation casts doubt and raises questions concerning the overall long-
term benefits that Cambodia may derive from Chinese investment and aid.
The question is whether China’s involvement will leave Cambodia with any
net positive gain. It is difficult and may be too early to answer this question
78 Heng Pheakdey
now. Although China has had a presence in Cambodia for centuries, its
serious involvement in the form of large-scale investment and aid, which
reflects its new foreign policy, is a recent phenomenon. There is some re-
ported evidence of negative consequences such as the loss of livelihood of
local communities and the deterioration of natural resources and the envi-
ronment, and some evidence of benefits seen in the creation of jobs and the
building of infrastructure, but the long-term net payoff has yet to materialize.
Also, the lack of empirical evidence coupled with the poor information
disclosure present a huge challenge to any attempt to assess the net impact
of Chinese investment and aid.
Although the net effect of China on Cambodia is yet to be determined,
there is one thing that most experts would agree on and that is the fact that
China will continue to play a vital role in Cambodia in the near future, and
that China’s dominance will persist. Cambodia is an essential partner for
China in the regional context, and Southeast Asia is arguably one of the
most important world regions for China. With the combined population of
591 million people and a combined nominal GDP of 1.4 trillion USD
(ASEAN 2011), ASEAN is significant for the growth of the Chinese econ-
omy. In fact, ASEAN is the fourth-largest trading partner for China, after
the EU, the US and Hong Kong (National Bureau of Statistics of China
2011). And given that 5 per cent of the ASEAN population is Chinese, the
values of this region vis-à-vis any other given part of the world are also cul-
turally the closest to China’s. Strategically, ASEAN also plays a critical role
in China’s “string-of-pearls” strategy to secure energy, exercise its maritime
power and balance the influence of the US. In this regional context, Cam-
bodia is one of China’s few friends: While Vietnam, Singapore, and the
Philippines have a closer relationship with the US, China’s closest allies are
Myanmar and Cambodia. China needs those two countries’ support in the
wake of disputes (for example, the South China Sea dispute) and in order to
maintain regional security in general.
China and Cambodia will always be good neighbours, close friends,
trusted partners and dear brothers […]. I’m [of the] firm belief that
with the care and support from the leaders of both countries and the
joint endeavours of the two peoples, the traditional friendship be-
tween China and Cambodia will be passed on from generation to gen-
eration, and the bilateral ties will [lead to] an even [more] promising
future (Pan Guangxue, Chinese ambassador to Cambodia; quoted in
the Phnom Penh Post 2011).
Cambodia, on the other hand, also needs China’s investment and aid for its
economic growth. With Cambodia’s government revenue currently at only
15.4 per cent of GDP (Um 2012), it will continue to depend on foreign aid
Cambodia–China Relations 79
for many years to come (presently almost half of its national budget comes
from aid). And given the government’s preference for Chinese “no-strings-
attached” aid over that from the traditional donors, China will remain a
major player and Cambodia–China relations will become even closer. There
are already signs of closer ties between the two nations. In February 2012,
for example, both countries agreed to advance the comprehensive relations
of strategic cooperation and partnership in trade, agriculture, infrastructure,
communication, security and law enforcement. Just four months later, Cam-
bodian and Chinese firms signed ten MoUs on business cooperation in the
fields of agriculture, mineral resources, food, garments, and electronic prod-
ucts. Through these MoUs, Cambodian companies expect to export 60,000
tons of rubber latex, 500,000 tons of rice, one million tons of cassava, and
3,500 tons of black pepper to China to supply those Chinese firms (China
Daily 2012b).
In short, Cambodia depends on China economically, while China needs
Cambodia politically and strategically. Both nations will continue to be good
friends at least until there is new leadership in either country. However, it is
of great importance that the two countries work together to ensure that their
relationship result in a win-win scenario. Among other things, serious efforts
must be made to improve the management of investment and aid. Scores of
literature have already proven that aid, if not well managed and if given in
the wrong context, will do more harm than good. Aid delivered over long
periods to nations with weak institutions has the potential to undermine
good governance and to reduce local ownership, accountability and demo-
cratic decision-making, and it does very little to promote economic growth
(Graham and O’Hanlon 1997; Easterly 2003; Tangri and Mwenda 2006). To
ensure that Cambodian–Chinese cooperation will ultimately turn out to be a
positive-sum game requires good leadership and accountable governments
with a long-term vision of achieving sustainable development. This will
entail placing great emphasis on improving transparency and information
disclosure, promoting a participatory and inclusive development approach
by involving relevant stakeholders, minimizing any potential negative impact
on the environment, and making sure that the benefits are shared among all
parties involved, particularly the local community.
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