Thayer Consultancy Background Brief:

ABN # 65 648 097 123

Cambodia and China’s Belt and
Road Initiative
October 18, 2023

We are preparing a report on Cambodian Prime Minister Hun Manet’s upcoming trip
to China in later October to attend the BRI Forum’s 10thanniversary. Cambodia is the
beneficiary of China’s massive Belt and Road Initiative, which was announced by
Chinese President Xi Jinping in 2013. Cambodia, a close ally of Beijing, has made the
initiative a central part of its policy planning.
Q1. We request your general assessment of China’s BRI on Cambodia
ANSWER: In general terms, the demand for funding for infrastructure in Southeast
Asia as well as across the Indo-Pacific is far greater than the existing capacity of
international financial institutions to provide. China’s BRI provides some funding
relief.
China is Cambodia’s largest trade partner, investor, lender of finance and largest
bilateral donor of development assistance.
Cambodia’s immediate support for Xi Jin-ping’s “initiative of the Century” attracted a
positive response from China. China can work with Hun Sen’s one-party regime and
gloss over its repression of domestic opposition. This means Cambodia can count on
China’s long-term commitment to fund needed infrastructure.
Q2. What are positive and negative consequences of Cambodia’s participation in the
BRI?
ANSWER: Cambodia has benefitted enormously from Chinese investment in
infrastructure under the Belt and Road Initiative (BRI). BRI funding has resulted in the
construction of roads, expressways, bridges, airports, sea ports and the energy sector.
This has increased both domestic and external connectivity. Goods and services flow
more quickly, lowering the costs of transport and trade, thus enabling development.
This has led to a decline in the incidence of poverty and the rise in living standards.
The negative consequences are manifold including the displacement of local residents
where BRI projects are carried out, damage to the environment and a growing gap in
wealth.
While not directly part of the BRI, development of Sihanoukville illustrates the
downside of Chinese funding. Sihanoukville has become a virtual Chinese enclave
where local residents have been marginalised. There has been an increase in
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corruption and the crime rate, including kidnapping. Also, there has been an increase
in trafficking in women for prostitution and trafficking in persons to assist in internet
scams.
China’s construction of the Lower Sesan 2 dam resulted in the displacement of around
5,000 indigenous and ethnic minority residents. These people were forced to relocate,
lost property and income, and were not properly compensated or compensated at all.
The dam has impeded fish migration and resulted in a lowering of fish stock affecting
communities who are dependent on fish for their incomes.
Q3. What is the future impact on Cambodia?
ANSWER: As Chinese BRI infrastructure projects are completed they will continue to
contribute positively to economic growth rates. But the cost of repaying loans and
maintenance and repair will fall on the Cambodian government. There is the risk that
Chinese companies may fail to deliver due to their own economic difficulties.
Also, there is a risk of over-reliance on China if, as seems likely, China cuts funding for
large-scale projects due financial difficulties arising from projects that do not generate
sufficient finance to justify the costs.
China will gain economic leverage and this could impact on Cambodia’s sovereignty
on particular issues where China asserts its strategic interests.
Q4. Will the BRI be a debt trap for Cambodia?
ANSWER: The cost of repaying loans, maintenance and repair will fall on the
Cambodian government. Economists estimate that two-fifths of Cambodia’s external
debt is owed to China or just below 40 percent of GDP. This is viewed as sustainable
at present. China has shown a willingness to renegotiate and refinance projects with
countries that struggle to meet loan repayments.

Suggested citation: Carlyle A. Thayer, “Cambodia and China’s Belt and Road Initiative,”
Thayer Consultancy Background Brief, October 18, 2023. All background briefs are
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Thayer Consultancy provides political analysis of current regional security issues and
other research support to selected clients. Thayer Consultancy was officially
registered as a small business in Australia in 2002.