Prime Minister Hun Sen declares Cambodia will not fall into China's 'debt trap'

Cambodian Prime Minister Hun Sen shakes hands with Chinese President Xi Jinping (Photo: Xinhua)

Speaking at the Future of Asia conference in Japan today, May 30, Prime Minister Hun Sen said that China respects Cambodia's sovereignty when it comes to Cambodia's use of loans from China.

“I have heard too many people say that Cambodia could fall into China’s debt trap,” Reuters quoted Prime Minister Hun Sen as saying.

“For Cambodia, we maintain our sovereignty in borrowing, we borrow according to the projects that we need and China respects our decision,” Mr. Hun Sen said in a speech broadcast on national television.

China is Cambodia’s largest aid donor and investor. Beijing has poured billions of dollars into Cambodia in loans and funds through its Belt and Road Initiative, a massive project to connect land and sea routes between Asia, the Middle East, Europe and Africa.

Prime Minister Hun Sen said that Chinese loans are long-term and low-interest, so total debt is also low, accounting for about 21.5% of GDP.

“Some countries owe up to 200%, 300% or 500% of GDP,” the Cambodian leader said.

According to data released by the Cambodian Ministry of Economy and Finance, Cambodia's public debt in 2018 was at 7 billion USD and Cambodia has paid 19% of the debt.

In February, the European Union, which accounts for more than a third of Cambodia’s exports, including staples such as clothing, shoes and bicycles, began a review of its trade agreement with Cambodia. The EU has sanctioned Cambodia for human rights violations as well as violations such as the arrest of opposition leader Kem Sokha and the dissolution of his party before elections.

Under the Everything But Arms (EBA) agreement, the EU allows Cambodia to export all goods, except arms, to the EU market without quotas or responsibilities. China has pledged to help Cambodia mitigate the impact of European sanctions.

China is the largest investor in Cambodia, having invested $12.6 billion since 1994, most of it in recent years. In addition to investing in infrastructure projects, China also provides defense aid to Cambodia.