Chinese investment slows, but experts see long-term prospects remain strong

Cambodia is hoping to attract a new wave of foreign investment, particularly from China, following the successful election on July 23. China has been the largest source of investment in Cambodia in recent years.

However, the slow return of Chinese investors is now becoming a concern. Cambodia is hoping that the reopening of the Chinese economy will lead to a renewed wave of investment, but it is too early to say whether this will happen soon.

There are many benefits to Chinese investment in Cambodia. It has helped to reduce unemployment rates, raise incomes, and boost exports. In the past, direct investment in Cambodia was largely dependent on the local wealthy, but Chinese investment has helped to create more opportunities for both foreigners and locals to set up factories to export goods.

This has generated a lot of revenue for the government, which has been used to develop the country’s infrastructure, such as roads, bridges, and schools.

“Cambodia has a policy of protecting foreigners, which means that investors can be confident that their investments will be safe,” said Mr. Lor Vichet, Vice President of the Cambodia-Chinese Commerce Association (CCCA). “For example, if an investor invests $1 million in Cambodia, they can be confident that they will be able to decide to invest up to $10 million if they see the potential for further growth.”

To make Cambodia even more attractive to foreign investors, Vichet urged the government to focus on attracting “Established brand” investors who will operate long-term or permanently in the country.

He continued that these investors could be big-name companies in the tourism, hospitality, manufacturing, and technology sectors. By attracting these types of investors, Cambodia can create even more jobs and opportunities for its people, and further develop its economy.

Cambodia is also developing its infrastructure sector, which is another attractive investment opportunity for foreign investors. However, one thing that investors need to consider is the price of electricity in Cambodia, which is relatively high compared to neighboring countries such as Thailand and Vietnam.

“There are about 200 Chinese investment companies that are showing interest in the Cambodian market,” said Vichet. “However, I think Cambodia should wait a bit this year because China needs to address the issue of economic recovery for a while before making a return.”

Meanwhile, the Chinese continue to represent a significant portion of investment into Cambodia, making up 52% of Foreign Direct Investment in 2022, said Lawrence Lennon, Managing Director of CBRE Cambodia.

He pointed out the outcomes include everything from the development of Sihanoukville SEZ creating employment for 80,000 workers, to the $2bn Phnom Penh Sihanoukville Expressway which has reduced travel time from six hours to three hours. There are several large-scale infrastructure projects also in the pipeline of a similar nature.

Lawrence believed that the capital city of Phnom Penh has transformed over the past decade in part due to Chinese investment in the real estate industry. Since 2019 office, retail, and condominium supply have all doubled in supply today reaching 1m sqm, 750,000 sqm, and 50,000 units respectively. This supply has created high competition from the perspective of landlords but equally has created great opportunities for businesses and individuals alike from the perspective of the occupier.

In a recent visit to Cambodia, Boris Xue, President of the Ningbo Chamber of Commerce, led a group of Chinese investors to explore investment opportunities in the country. Mr. Xue expressed optimism about the investment climate in Cambodia and pledged to return in August with over 40 investment companies.

Last year, local investment accounted for 53.54% of total investment, while Foreign Direct Investment made up the remaining 46.46%. China stood out as a significant foreign investor, contributing 42% of the total.