The special relationship between China and Cambodia

By Suwatchai Songwanich 

The Nation

Chief executive Officer, 

Bangkok Bank (China) October 27, 2014 

Undoubtedly Asean is very important for China but within the region the strength of the relationships vary greatly.

Besides Thailand, Cambodia is probably China's closest regional partner. Over the past 15 years, China has invested around US$10 billion (Bt325 billion) in Cambodia. Much of this has taken place in recent years, as an official visit in 2006 by the premier of China's State Council, Wen Jiabao, stimulated a strong wave of economic activity.

Many cooperative agreements were signed during the premier's visit, formalising the legal and business framework, and this opened up the door to more financial support from China. 

In 2011, the Bank of China opened a branch there, the first mainland bank to do so, and the Export-Import Bank of China began financing many major development projects. 

A major early initiative of Exim Bank was the financing of a multimillion dollar hydroelectric dam in Kampot - the Kamchay project - which began construction in 2007 and went into operation in 2011. 

This is one of five dams with total capacity of 915 megawatts built with the assistance of China and they will provide Cambodia with the reliable energy supplies it needs for its future development.

Last year Exim Bank signed an agreement to provide a $1.67 billion loan for a petroleum refinery on the border of Sihanouk and Kampot that is being built by China Petroleum and Chemical Corporation and is due to be completed in 2018. 

Exim Bank also signed an agreement with Cambodia's Rural Development Bank to help Cambodia export one million tonnes of rice by next year.

Most ambitious agreement

Exim Bank's most ambitious agreement so far was also signed last year. It agreed to provide $9.6 billion to build an iron and steel plant in Preah Vihear linked by a 405-kilometre railroad to a new port and bridge in Koh Kong, also financed by China.

While most of the Chinese projects in Cambodia have focused on energy and infrastructure, these are paving the way for yet another stage of development - the expansion and modernisation of Cambodia's manufacturing and its integration with the regional supply chain. 

Cambodia has some of the cheapest labour in Asean and this, together with its open investment environment, makes it attractive as an alternative production base for China. 

Last year, China overtook South Korea as the biggest investor in Cambodia. China is also Cambodia's biggest aid provider; partner for large infrastructure projects, and financier and trade partner. 

It is now assuming a new role as a patron for science and technology development. In August, the two countries agreed to establish the Cambodia-China Technology Transfer Centre, based in Phnom Penh. It is significant that Cambodia became the first Asean country to sign such an agreement, which will help accelerate the use of science and technology for socioeconomic development.

This special relationship with Cambodia is highly valued by China and plays a major role in accelerating Cambodia's economic development. 

Thai investors must certainly keep a close eye on the changes taking place in our neighbour, and position ourselves well to take advantage of future growth opportunities.