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China and investments it has made in Cambodia

Posted Date: 2017-07-31

The Cambodian economy has performed relatively well in the last two decades with an average growth rate of more than seven percent from 2000 to 2016, making it one of the fastest growing economies in Asean and East Asia.

It is forecast that the Cambodian economy will remain dynamic with a growth rate of seven percent for 2017 and 2018, although the global economic environment remains volatile and uncertain.

Foreign direct investment is the key driving force of Cambodia’s economic development. China, Japan, South Korea and Asean countries are the main sources of the foreign direct investment (FDI) inflow to the kingdom.

From 1994 to 2016, the total investment capital from China was about $14.7 billion, concentrated on four sectors – the agriculture and agro-industry, the industrial sector, physical infrastructure and services and tourism

Chinese investments to Cambodia are mainly driven by deep political trust, economic conditions, market access, low labour costs and natural resources.

The reasons given for China investing in Cambodia are the “excellent diplomatic relationship” between the two countries, the relatively stability of the political situation and a sound macroeconomic environment, low labour costs, shared Asian values and Cambodia’s strategic location in mainland Southeast Asia.

Chinese investments to Cambodia are enabled by the bilateral agreement on the protection and promotion of investment, which came into force on August 19, 1999.

As a least developed economy, Cambodia has enjoyed preferential trade agreements with and market access to the world market, particularly the United States and the European Union.

As a member of the Asean economic community, Chinese firms investing in Cambodia can export their products to the whole of the Asean market, which has a population of more than 620 million.

Cambodia has relatively cheap labour costs – the minimum wage for a factory worker was $153 as of 2017.

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