Cambodia recalibrates its China policy, rather than realigns

Chandarith Neak Chhay Lim
The Interpreter

In a world defined by competing powers, Cambodia pursues its own agency.

 

Cambodia’s Prime Minister Hun Manet outreach to Western capitals has raised some questions in China (Tang Chhin Sothy/AFP via Getty Images)
Published 29 Apr 2025

    Cambodia

The recent state visit by China’s President Xi Jinping to Phnom Penh, capped by 37 new agreements and a pledge to deepen an “all-weather Cambodia-China community of shared future”, was intended to reaffirm Beijing’s centrality in Cambodia’s foreign policy. But the visit coincided with Phnom Penh’s ongoing recalibration of its external engagement – carefully balancing ties with Beijing while opening space for deeper engagement with the West.

Since taking office in 2023, Prime Minister Hun Manet has stepped up Cambodia’s outreach to Western capitals, including high-level delegations meeting with the US Congress and the Pentagon. Some Chinese analysts, noting his Western education, have interpreted this as a pivot to the West. But this misreads both intent and context. Cambodia is not switching or taking sides but adjusting a relationship that risks becoming overly rigid and inflexible. The goal is to expand flexibility and reinforce sovereignty amid global uncertainty.

The Cambodian People’s Party remains central to this recalibration. With Hun Sen still a dominant figure in the party and Senate, institutional continuity is clear. Hun Manet’s outreach represents a refinement – not rupture – intended to reduce vulnerability while preserving China’s benefits.

Cambodia’s geography and economy bind it to China, yet sovereignty necessitates strategic flexibility.

The economic rationale for this recalibration is compelling. From September 2023 to September 2024, Cambodia attracted US$8.1 billion in foreign direct investment, with China leading but not monopolising. Inflows from South Korea, Japan, Singapore, Vietnam, Malaysia, Thailand, Canada, and the United Kingdom underscore the value of diversification.

Meanwhile, the US absorbs 38 per cent of Cambodia’s exports – chiefly garments – a market too vital to sideline amid global economic volatility. But US President Donald Trump’s recent 49 per cent tariff announcement on Cambodian goods threatens textile industry exports. Hun Manet’s government faces domestic pressure to protect this critical sector, which employs more than 800,000 workers and remain highly vulnerable to US tariffs or trade policy shifts. Cambodia responded quickly by offering to slash tariffs on 19 American import items to just 5 per cent – a goodwill gesture to reopen trade talks and cushion the blow to Cambodia’s economy. But Hun Manet may need stronger leverage, beyond tariff cuts, to make a deal with Trump.

Regionally, Cambodia is making the most of ASEAN’s free trade agreements, such as the ASEAN-led Regional Comprehensive Economic Partnership, as a buffer against great power competition. It has also pursued bilateral trade agreements, including with South Korea and with Gulf countries in addition to the Cambodia-China FTA. These agreements are key tools in hedging against volatility and enhancing Cambodia’s negotiating power.

 

A minesweeper from Japan’s Maritime Self-Defence Force this week docked at the Ream Naval Base – the first foreign navy to do so (Kyodo News via Getty Images)

Still, recalibration does not signify abandonment. China remains Cambodia’s pre-eminent economic partner, with over 40 per cent of FDI and driving transformative infrastructure projects. Hun Manet’s 2023 Beijing visit secured US$1.1 billion in investment and boosted bilateral trade to $14.4 billion by November 2024. Xi’s visit also coincides with the China-funded Ream Naval Base’s inauguration, and renewed momentum for the Funan Techo Canal, although financing details remain unclear. The two leaders also rejected external interference and unilateralism – a pointed response to Western tariffs and regional pressure. Inevitably, given Cambodia’s geographic proximity and economic interdependence, severing ties with China would be impractical and counterproductive.

Yet Phnom Penh is also alert to overexposure. As of mid-2023, Cambodia owed $3.96 billion to China, out of a total foreign debt of $10.23 billion. This has heightened concerns about debt sustainability, particularly amid global economic uncertainty. This caution likely explains Cambodia’s decision to refrain from seeking additional loans from China in 2024, reflecting a strategic focus on fiscal resilience. The outcomes statement of the visit this time also revealed no new Chinese grant aids or loans. It is the right time for Cambodia to focus on trade and investment-led growth rather than falling into an aid-trap.

The security domain is recalibrated, too. Cambodia is diversifying its defence partnerships to counter perceptions of dependence. In January, General Vong Pisen met with US Defence Attaché Lieutenant Colonel Kyle Saltzman to discuss resuming the Angkor Sentinel exercise, suspended since 2017, marking a potential thaw in US-Cambodia military ties. In addition, a minesweeper from Japan’s Maritime Self-Defence Force docked at Ream Naval Base at the weekend – the first foreign navy to do so. These developments challenge the prevailing narrative of Chinese exclusivity at Ream and signal Cambodia’s strategic autonomy, which includes room for military diplomacy with a broader range of actors.

Cambodia’s geography and economy bind it to China, yet sovereignty necessitates strategic flexibility. Hun Manet’s recalibration is not a naïve tilt toward either the West or China but a deliberate strategy to diversify dependencies, secure economic stability, and broaden diplomatic manoeuvrability.