Mainland China once again emerged as Cambodia’s largest merchandise trading partner last year, with a volume of $11.686 billion – up 4.39 per cent over 2021 – of which Chinese exports to the Kingdom accounted for a staggering 89.38 per cent share, up 2.87 percentage points on a yearly basis, according to the General Department of Customs and Excise (GDCE).
This market represented 22.29 per cent of Cambodia’s total international merchandise trade for the year, which was to the tune of $52.425 billion.
The Chinese mainland was the largest exporter to Cambodia, with a 34.89 per cent market share, or equivalent to $10.446 billion – up 7.86 per cent year-on-year. The region constituted a 5.52 per cent share of the Kingdom’s total exports, at $1.241 billion, which was down 17.85 per cent from the corresponding 2021 figure.
The Kingdom’s trade deficit with mainland China grew by 12.61 per cent, from $8.174 billion in 2021 to $9.205 billion in 2022, GDCE statistics indicate.
Bilateral trade between Cambodia and China has remained in positive territory over the past couple of years, despite Beijing’s Covid-19 control restrictions on personal travel and freight movements, Cambodia Chamber of Commerce vice-president Lim Heng commented to The Post on January 11.
For reference, although the two-way merchandise trade shrunk by 4.44 per cent in 2020, it rebounded by 36.80 per cent in 2021, GDCE figures show.
Heng attributed the uptrend in trade to improvements in inter-governmental relations, as well as the simultaneous entry into force of the bilateral Cambodia-China Free Trade Agreement (CCFTA) and the Regional Comprehensive Economic Partnership (RCEP) – on January 1, 2022 for both jurisdictions.
He suggested that Beijing’s January 8 relaxation of Covid-19 restrictions will also appreciably bump up bilateral trade, especially when it comes to Cambodian agricultural exports.
“Although Cambodia’s exports to China are far less than its imports, it doesn’t affect Cambodia’s economic performance, since the large sums paid to the Chinese market are mostly for raw materials used in the production and processing [of goods] in Cambodian factories to be sold around the world,” Heng argued.
Another major import is construction materials for the development of infrastructure and other projects, he said, adding that Cambodia predominantly exports agricultural products, as well as textile-related items to a lesser extent.
A step beyond
The CCFTA covers 10,800 tariff lines for Cambodia and about 8,500 tariff lines for China, and “goes beyond what was offered under the ASEAN-China FTA [free trade agreement], covering an additional 340 tariff lines”, which include cereals as well as live animals and products thereof, the World Bank (WB) reported recently. The WB had put the China figure at 9,530 in an earlier report.
On January 1, 2022, a total of 98 per cent of China’s tariff lines became zero-rated, and 95 per cent of the 340 commodities untaxed, the Washington-based multilateral lender said. The Post understands that taxes on the remaining five per cent will be scrapped within the subsequent 10 years.
And, the RCEP is the world’s largest trade pact, comprising all 10 ASEAN member states and five additional Asia-Pacific countries, namely Australia, China, Japan, New Zealand and South Korea.
In a previous interview with The Post, Hong Vanak, director of International Economics at the Royal Academy of Cambodia, propounded that, through bilateral cooperation, the Kingdom has throughout the centuries developed its diplomatic and trade relations with dynastic China and the current Chinese state.
It comes as no surprise that large quantities of Chinese goods end up on the Cambodian market, given China’s large population and strong economic activity, he explained, adding that a considerable portion of imports from China now are raw materials and inputs for the export manufacturing industry.
Be that as it may, local players must make a renewed effort to leverage Cambodia’s agricultural strengths and unlock the Kingdom’s export potential with China, he opined.
He also suggested building up production and processing capacities, as a step to reduce overall import dependence.
“Although the trade volume between the two countries has increased, the declining exports could be seen as a bad sign for Cambodia,” Vanak said.
“Cambodia must strive to further diversify its exports, and enhance its export capacity.”
The National Bank of Cambodia (NBC) reported the cumulative total FDI inflows in the Kingdom between August 5, 1994 and December 31, 2021 at 168.8 trillion riel ($41.0 billion), up 11.2 per cent from the nearly 152 trillion riel recorded by end-2020.
The Greater China region – comprising mainland China, Hong Kong, Macau and Taiwan – accounted for the lion’s share at $18.0 billion or 43.9 per cent, followed by South Korea, Singapore, Vietnam, Japan and Malaysia.
For context, August 5, 1994 was the day when the late King Norodom Sihanouk signed Royal Decree No 03/NS/94 promulgating the old Law on Investment and establishing the Council for the Development of Cambodia (CDC), the government’s highest decision-making body for large-scale investments.
