China, ASEAN and Cambodia

The Rise of China and Cambodia

Thursday, 04 September 2014; News by Chheang Vannarith

PHNOM PENH (Khmer Times) – The rise of China generates both opportunities and challenges for Southeast Asian countries. China is both a global and regional economic locomotive. It drives regional economic development through the flows of trade, investment, and development assistance. But, meanwhile, it also creates a region-wide intense economic competition and a dependent-on-China economic development model.

During the Asian financial crisis in 1997, China significantly contributed to the regional bailout packages. Again, in the aftermath of the global financial and economic crisis in 2008, China provided economic assistance and loans to restore economic conditions of the crisis-hit countries and regions.

Foreign economic policy is the main pillar of China’s foreign policy towards Southeast Asia. In 2010, China-ASEAN Free Trade Agreement (CAFTA) came into force, paving the way for deepening institutionalized trade ties between China and ASEAN member states. China is now ASEAN’s largest trading partner, while ASEAN is China’s third largest trading partner.

Bilateral trade volume reached US$350.5 billion in 2013 – accounting for 14 percent of ASEAN’s total trade. It is expected that the trade volume will reach US$500 billion by the end of 2015. In 2013, ASEAN received US$8.6 billion of foreign direct investment flow from China, accounting for 7.1 percent of total inflow of foreign direct investment ( FDI) to ASEAN.

In October 2013 – during his state visits to several Southeast Asian countries – Chinese President Xi Jinping initiated the 21st century Maritime Silk Road to promote marine economy, maritime connectivity and trade relations. However, such increasing common economic interests are insufficient to building regional common public good, which includes strategic trust, confidence, peace and stability. China has to promote other fields of cooperation as well.

On the security and strategic front, China is struggling to build its image as a peaceful-development-oriented rising power. In 2002, China and ASEAN signed a Declaration on the Code of Conduct of Parties in the South China Sea (DOC) and adopted a Joint Declaration on Cooperation in the field of non-traditional security issues.

China has been arguably socialized by ASEAN norms. These norms include multilateralism, equal partnership, comprehensive security cooperation, peaceful settlement of disputes, non-interference, consensus-based, and collective identity building.

“Security in Asia should be maintained by Asians themselves,” stated Chinese President Xi Jinping at the fourth Summit of the Conference on Interaction and Confidence Building Measures in Asia (CICA) in Shanghai on May 21, 2014.

For Cambodia, China is one of the most important development and strategic partners. China is the top provider of development assistance and soft loans to Cambodia. China has provided about US$3 billion to mainly develop infrastructure without many conditions attached. However, the quality of the development assistance is relatively low. It lacks transparency and effectiveness.

China is also the main source of inflow of foreign direct investment to Cambodia. The cumulative Chinese investment in the Kingdom accounted for US$9.6 billion from 1994 to 2013. The investment projects focus on labor-intensive industry, particularly the garment sector and natural resource extraction.

China is Cambodia’s main trading partner. In 2013, the bilateral trade volume accounted for more than US$3 billion.

At the bilateral meeting between Sun Chanthol, Cambodian Minister of Commerce, and his Chinese counterpart in Beijing last August, he requested Chinese government to provide duty and quota free to Cambodian. Cambodia hopes to see an increase of duty-free rice export to China from 100,000 to 500,000 tons.

Although China is the main development partner of Cambodia, the Chinese image among the Cambodian general public is not that good. Some may argue that China fails to project its soft power in Cambodia. China only focuses on the government, political parties, and business community. It does not pay enough attention to the people, especially those at the grassroots.

Therefore, China needs to invest much more in building its image abroad. Economic instrument alone does not help China to project its global power status. China needs to improve its transparency and effectiveness of its development assistance. In addition to building roads and bridges, it should also consider building schools and hospitals.

Chinese investment in Cambodia should closely link with poverty reduction, sustainable development, and inclusive growth. The Chinese companies must develop a culture of corporate social responsibility. Otherwise, it is hard for China to win the hearts of the local people.

Moreover, China needs to further accelerate people-to-people ties through cultural and educational exchanges. China-Cambodia young leadership programs should be developed to nurture and connect the future leaders of the two countries.

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