ISPI - Istituto per gli Studi di Politica Internazionale

03/25/2024 | Press release | Distributed by Public on 03/25/2024 08:57

The Intensification of Sino-Cambodian Relations: Geostrategy Beyond Infrastructural Development

The first-ever visit of two Chinese warships at Cambodia's Ream Naval Base in December 2023 is the latest and more tangible sign of the burgeoning "impregnable ironclad friendship" between the two countries. Far from being a just rhetorical label, the definition encapsulates well the depth that the links between Beijing and Phnom Penh have reached in recent years, with the former having attained the status of indispensable economic partner of the latter. Data clearly show that Beijing is the Kingdom's biggest trading counterpart and that Chinese foreign direct investments accounted for 44% of Cambodia's total between 1994 and 2021. In addition, since the last decade, China has been credited to be the largest provider of Official Development Aid to the country. Finally, the entry into force of the China-Cambodia Free Trade Agreement in January 2022 has meant the elimination of tariffs on most Cambodian agricultural exports to China, further improving the favourable access to the Chinese market that the country already enjoyed under the ASEAN-China Free Trade Agreement.

In recent years, however, there is no other field that shows more clearly Cambodia's reliance on China than the infrastructural one. Since its launch in 2013, Phnom Penh's leadership has been an enthusiastic supporter of China's Belt and Road Initiative, which is considered instrumental in fostering development and reducing the national poverty rate. As a consequence, a flurry of China-backed and -financed infrastructural projects have been launched in Cambodia, in sectors as diverse as hydroelectric energy, power transmission systems, Special Economic Zones, real estate properties, casinos and telecommunications. But the one sector where the bulk of Chinese investments seem especially funnelled is that of connectivity. In line with the BRI's main rationale, which is to establish a China-centred network of infrastructures, Beijing is nowadays heavily involved in developing numerous connectivity-related projects in the Southeast Asian nation.

China's infrastructure spree in Cambodia

One of the latest cases in point dates back to January 2023, when the China Road and Bridge Corporation (CRBC) presented to the Cambodian Ministry of Public Works and Transport a feasibility study to construct a 382-kilometre high-speed railway connecting the capital Phnom Penh to the city of Poipet in the north-west of the country at the border with Thailand. In parallel, in July of the same year, it was reported that CRBC also was carrying out a feasibility study to upgrade the already existing Phnom Penh-Sihanoukville railway to a high-speed rail. These future train lines would be another step towards the Chinese grand plan to create an integrated network of high-speed railways linking the main cities in Southeast Asia, which is an integral component of China's engagement with its southern neighbourhood. What can be considered as the first leg of this massive project, the high-speed train linking the Chinese city of Kunming to the Lao capital Vientiane, already started functioning in December 2021.

In addition, in recent years Chinese-controlled enterprises have been at the forefront in developing other land-based connectivity projects throughout Cambodia. A new expressway connecting Phnom Penh to the city of Sihanoukville was unveiled in November 2022, in the presence of the Chinese Premier Li Keqiang. The highway costed around $2 billion and has been constructed through a public-private partnership involving the CRBC and the Chinese Government on one side, and the Cambodian PPSHV Expressway and the Cambodian Government on the other. The works for another expressway worth $1.6 billion and linking the capital to the city of Bavet, at the border with Vietnam, started in June 2023. In this case, too, CRBC will play a primary role in the project development.

Chinese companies have also built numerous so-called "Cambodia-China friendship bridges" across different rivers. The latest infrastructure of this kind, constructed by the Shanghai Construction Group, has been inaugurated in March 2021, while in January 2023 the then-Prime Minister Hun Sen together with the Chinese ambassador to the country, Wang Wentian, broke ground for the works of an important 1.7 kilometres bridge over the Mekong in Cambodia's north-eastern territory.

Alongside, Chinese construction companies have been active in the development and expansion of key air nodes in the Southeast Asian nation. The new Siem Reap-Angkor international airport has been built under the supervision of a company affiliated with China's Yunnan Investment Holdings and opened in November 2023. In parallel, China-based companies have also taken a leading role in the realisation of the new Phnom Penh airport, which is set to begin operations in 2025.

Finally, Cambodia has recently unveiled plans to build a 180 kilometres-long canal, connecting Phnom Penh's river port to the sea in the Gulf of Thailand. Chinese entities will also fund the massive infrastructure, worth $1.7 billion.

Concerns over Beijing's heavy involvement

By summing up the number and volume of resources poured into all these projects, it is clear how the scale of Chinese investments in the Southeast Asian country is massive. While other external infrastructure investors - such as Japan - are also present in the country, they are far from matching Beijing's level of involvement. For sure, China-backed projects are an effective way to fill an infrastructural gap that is a well-documented reality in Southeast Asia. According to some estimates provided by the Asian Development Bank in 2019, to maintain its growth in line with last year's levels the region would need around $210 billion a year in infrastructural projects. In this sense, Chinese investments in Cambodia help address a need that, if not tackled effectively, could hinder the latter's path to development.

On the other hand, China-originating investments and their pervasiveness raise different kind of concerns. To start, Cambodia's indebtedness to China could make the country fall into the so-called "debt trap". A similar occurrence appears to be happening in neighbouring Laos, which is struggling to pay back the different loans contracted from Chinese entities. At present, Cambodia's foreign debt is close to $10 Billion, of which 41% is owned by China. On its part, however, the Cambodian Government is very vocal in denying that the country is slipping into a debt trap. Also, some of the new projects, such as the two aforementioned expressways, will be financed via a "build-operate-transfer (BOT)" model, through which the new infrastructure will remain under the control of the builder for several decades and be paid back through the revenue it will generate before eventually being handed over to Cambodia. While such BOT financing scheme is beneficial to Cambodia economic-wise, as it will not directly impact the country's indebtedness level, on the other hand, it can be potentially problematic for Cambodia's autonomy. By entering into such a deal, in essence, the country handles over to Chinese state-controlled companies the management of crucial national assets, with future consequences that are difficult to predict.

Finally, some other Chinese-backed infrastructural projects have raised eyebrows within the international community, and the United States in particular, as they seem to have been constructed with the latent potential to be used for military purposes. The main case in point relates precisely to the expansion of the naval base of Ream, mentioned at the beginning. China is deeply involved in the upgrading of this Cambodian military outpost, and this has raised concerns over the possible establishment of a People's Liberation Army Navy (PLAN) base there. Officially, Cambodia's Constitution explicitly rules out the possibility to set up foreign installations on the country's territory. However, in a 2019 article, the Wall Street Journal reported about an alleged secret deal between China and Cambodia for the use of a portion of the port for military purposes. Even though Cambodian authorities have always denied any such agreement, the significant expansion works in the maritime outpost have led some observers to air the suspicion that it is being upgraded precisely with this objective in mind. In particular, satellite images collected over time by a geospatial intelligence company have recently revealed how works are underway to complete what appears to be a large pier, whose design is similar to PLAN's only naval outpost outside China, in Djibouti. The aforementioned first-time visit of the two PLAN warships seems to confirm the links between China's military and the infrastructure.

In close connection to this instance, China is also behind the construction of the Dara Sakor international airport, being built by the Tianjin Union Development Group in the Koh Kong province on the Cambodian coast. In this case, as well, the infrastructure has been suspected of being a covert potential future military asset for China. Its location at the other extremity of the small bay of Kampong Som, prospicient to the Ream naval outpost, would allow Beijing to control an integrated air-naval base, from which it would be able to operate in the strategically relevant gulf of Thailand. The doubts concerning its real purpose are fuelled by the fact that the significant investment in its construction, accounting for $350 million, does not seem to match the airport's location, isolated from any significant tourist attractions or areas of economic relevance. The Dara Sakor airport affair has gained international attention in 2019 and the rationale of the project does not appear to be clear to this day. But Cambodian authorities have been very outspoken in denying that the country's airports could potentially be used by China's military in the future.

The geostrategic implications of infrastructure development

The United States' concerns that these suspicions may become a reality are also informed by the fact that the country seems prone to augment its defence ties with Beijing. In an apparent departure from its long-established policy of non-alignment that has historically characterised Cambodian foreign policy, in the last period Phnom Penh has been gradually inching away from the US and getting closer to China in security matters. In 2017, Cambodian authorities put a halt to the annual Angkor Sentinel military exercise with the US that had been operational since 2010. In parallel, defence links with Beijing are on the rise. Besides the supply of military equipment, the recent inauguration of the first-ever joint naval exercise between Cambodia and China provides the most tangible example of this distancing away from the United States. As a result of this increasingly apparent proximity, in 2022 the US Administration resorted to adopting the Consolidated Appropriations Act, which forbids any American assistance to the Cambodian Government unless the Secretary of State evaluates that said government is taking concrete initiatives to uphold its autonomy against China's interference.

As it is evident, China-Cambodia relations in the latest years have reached an unprecedented depth. While on Phnom Penh's part this push has been partly motivated by its necessity to foster economic development and consolidate the legitimacy of the long-ruling Cambodian People's Party, on the other hand, different elements point towards a gradual alignment of the country with China. The recent appointment to the country's Premiership of Hun Manet, former Prime Minister Hun Sen's eldest son, will likely not alter this policy course.

On its part, Beijing's substantial engagement with the Southeast Asian nation appears to be strongly connotated by geostrategic motivations. For one thing, the expansion of economic links and the increased influence of China-controlled companies in Cambodia help solidify China's political clout over the Southeast Asian nation. Even more relevantly, Chinese diplomacy is currently on the lookout to expand its military links with different small but strategically relevant states located in regions around the region, as the recent example of the Solomon Islands testifies well. In this sense, the suspects over the construction of potential dual-use infrastructures in Cambodia can be read through these lenses. If it will eventually materialise, the establishment of a base in Cambodia for the use by the Chinese military would provide Beijing with a key hotspot, with both a strategic and symbolic relevance.

Until now, however, there is no absolute certainty whether eventually the base will be completed, whether China will have exclusive access to it and about how big and relevant future military installations will be. Nevertheless, the growing depth and evolution of China-Cambodia security relations presents a profile of relevance in the context of current Southeast Asian regional dynamics and growing Sino-American competition, worth to be closely observed.