Since 2013, the People’s Republic of China (PRC) sponsored an initiative called the Belt and Road Initiative (BRI): an investment initiative in foreign nations spanning seven sectors and over one hundred different countries, including the U.S, with a new canal in Cambodia costing over $1.7 billion as one of the latest in a long line of projects. This investment strategy has focused on many developing countries throughout the world, including Cambodia, by focusing on building and rebuilding trade routes to establish what could be called a modern Silk Route. Essentially, connecting China to neighboring regions and interconnecting the world at large. The Belt and Road Initiative has become a major piece in China’s foreign policy, with the PRC going so far as to officially write it into their charter.
The minor projects embedded into the operations are considered to be self-described, by China, as focusing on “small yet beautiful” improvements; however, the projects are usually much more large-scale. With an average investment in 2023 costing $499 million USD, and the average construction deal size being $401 million USD.
China has sought to become a global superpower, an eastern rival to the power of the United States in the west, and by investing in foreign nations, specifically developing ones. By doing so, the countries seek to ingratiate themselves, politically and economically, with these developing countries. For example, detractors to the Belt and Road initiative accuse China of laying debt traps for poorer countries in the past that may never be able to repay their loans and say this may be their latest ploy. Naysayers point to countries such as Myanmar, who, in 2011, elected to cancel a $1 billion USD dam project with China over similar concerns. As well as the Philippines. While having benefited from the short-term employment opportunity and economic boost from BRI projects, the Philippines have seen an increase in corruption and criminal activities such as underground casinos as money floods in and gets indirectly channeled to illicit activities.
Still, China continues to pursue this course of action at an increasing rate. In the past year, China invested 37% more in Asian nations than it did in the prior year, now up to approximately $20 billion USD, with a corresponding increase in the total worth of construction contracts moving up by 14% to a figure around $17 billion USD in 2023 – with Indonesia as the largest benefactor, receiving $7.3 billion USD in the past year.
While on the other hand, China’s investments in countries that are not included in BRI have fallen drastically. Six countries - the Philippines, Mongolia, Myanmar, Papua New Guinea, Tajikistan and Turkey - faced drops of 100%, meaning no new investments were made at all, and other countries such as Australia and Pakistan’s joint China-Pakistan Economic Corridor (CPEC) seeing reductions in spending of 66% to 74%, respectively. Analysts note that China follows a pattern of investing less into countries that are in extreme political or civil upheaval and focus funding elsewhere. The United States has long played a cohesive role as the world’s foremost superpower. The advances of China into a similar global niche could affect the United States’ approach to foreign policy as other nations now have options when it comes to what type of governmental system they choose to align themselves with. In 2021, when the Office of the Director of National Security published the 2021 Annual Threat Assessment, China’s play for a greater role on the world stage was identified as the foremost threat to the United States.
The new Funan Techo Canal in Cambodia is another in a long line of investments into members of the Association of Southeast Asian Countries – an intergovernmental organization (IGO) promoting the interests of the southeastern Asian region, most of which receives funding from China’s BRI project. With investments such as the new dam, China is Cambodia’s largest investor. The project was funded 51% by Cambodia and 49% by China, and with a $1.7 billion USD price tag represents 5% of Cambodia’s GDP.
Many theorize as to why China chose to make this particular investment and wonder about the potential implications. Ranking a 9 out of 10 as a source of imports for China, 7 out of 10 as a source of exports, and 5 out of 10 as a trading partner in the IGO, Cambodia has historically been a rather minor trade partner even among ASEAN countries. Some analysts say that Belt and Road Initiative projects can serve to lessen Cambodia’s dependence on Vietnam, a country that has some enmity with China over slower progress in its projects, environmental concerns, and the lurking concern of debt traps. Others point to the United States and its allies’ recent sanctions on Cambodia over perceived human rights violations as pushing them into China’s arms. With Cambodia’s regime being comparable to China’s albeit on a smaller scale, some say that China views them as a kindred nation, supporting them on large issues such as a potential reunification with Taiwan, and seeks to influence the whole region by using Cambodia as a proxy. Overall, many see China’s investment into the ASEAN complex as a way to expand its green energy initiative and to gain further access to critical minerals that lie underneath the soil in southeast Asia.
Analysts worry about the financial state of China even as investments increase abroad. Though the People’s Republic of China (PCP) set their target GDP increase at 5%, it grew at a rate of only 4.7% from April to June, down 0.6% from the previous quarter. Experts point towards higher unemployment rates and drops in property value as key stimuli creating the economic downturn. To counteract such effects, China released a stimulus package that cut its seven day repo rate, a rate short term loan used by the central bank as a way to increase economic output, down to 1.5% from 1.7%. This is very relevant to the U.S. as China is the U.S.’s largest competitor and the world’s second largest economy. Any changes with the PCP has a ripple effect throughout the world.
The western world has not turned a blind eye to China’s doings. In response, the G7 – an economic and political alliance between European and Northern American countries – released its own version of the BRI, called the Build Back Better World (B3W), back in 2021 as an alternative to Chinese investment. Whereas the BRI has focused more on physical infrastructure, the G7 says the focus of their program will focus more on human infrastructure, such as health and education. However, because key details of the B3W such as how much G7 countries actually plan to fund the program and whether certain countries will be able to meet its rigorous requirements for environmental, labor, and financial regulations have yet to be decided, it remains uncertain how and in what manner B3W will compete with the BRI. As the wealthier nations around the globe compete to lend a helping hand to their poorer neighbors by taking different tacts, only time will tell what relationships will form.