Chinese Infrastructure Investment in Cambodia

Driving through Phnom Penh from the airport for the World Economic Forum on ASEAN, the amount of ongoing construction suggests a city on a rapid growth trajectory. My taxi driver confirmed this as he talked about his house which, at 10km away, used to be in the suburbs yet is now part of the bustling metropolis of Cambodia’s capital.

South Korean, Malaysian and Japanese companies all have complexes being built in the city but, unsurprisingly, the main players are the Chinese. The major new highway into the centre of Phnom Penh is Chinese invested and a large amount of shopping and residential complexes on the same road are all under Chinese brands.

Some Southeast Asian nations bolstered their ties with the US as tensions over the South China Sea fuelled friction; however Cambodia became China’s staunchest counterweight. The FT ran a piece in September 2016 on the ways in which China bought its way into Cambodia. Phay Siphan, a Secretary of State within Cambodia‘s Council of Ministers was quoted saying ‘We choose China because (its investment) does not come with conditions’. This may be so, but as regional tensions have grown, so has the value of Cambodia to Beijing, especially due to its membership in ASEAN. As ASEAN works by consensus, just one objection to an initiative can stop proceedings. Therefore having Cambodia on side is important for China when dealing with its neighbourly bloc.

In October 2016, Chinese President Xi Jinping visited Cambodia and according to Reuters, 31 economic agreements, including soft loan deals of approximately US$237m, were signed. Xi Jinping also pledged to push for Chinese investment in Cambodian infrastructure and cancelled roughly US$89m in Cambodian debt. A forum hosted by Cambodian Prime Minister Hun Sen later in the year was organised alongside the China Minsheng Investment Group (CMIG). CMIG is a joint establishment of 59 private enterprises founded in Shanghai and focused on integrating finance with industries such as construction, new energy and aviation. It is also said to be the largest private equity fund on board with the Chinese-led Belt and Road project; more proof of the high intensity of Chinese investment into infrastructure in Cambodia.