China’s Near Abroad: Relations with Vietnam, Cambodia & Laos

IndoChina1886

This week I take a look at Chinese ties with Indo-China, I’ve spent some magical times in this part of Asia both on holiday and business. It doesn’t get much better than eating Vietnamese soft shell crab, washed down with cold beer overlooking the bustle of Saigon or lying in the jungle watching the sunrise over the ruins of Angkor Wat.

When I first visited the region 15 years ago it took a day to travel 120 km across a potholled road with no bridges from the Thai border to Siem Reap, Cambodia still very much visibly scarred from war. Since then Cambodia and its neighbours have enjoyed a long economic boom, driven in part by Chinese demand. Below I look at Vietnam, Cambodia and Laos and how they have developed trade ties with their giant Northern neighbour.

Vietnam

Vietnam has followed a similar economic and political path to China, specialising in low cost manufacturing and exports to Western countries, moving away from a socialist economy to one with a significant role for the private sector, but with the Communist Party retaining political control. Vietnamese companies have also emulated their Chinese peers becoming more assertive in recent years and successfully investing abroad in Africa and Latin America to secure natural resources. Most notably PetroVietnam successfully won bids to drill for oil in Venezuela across the rich Orinoco belt, much of this is shipped back home to supply the power stations which are crucial for the country’s industrialisation programme.

Sino-Vietnamese relations are poor thanks to mutual suspicion dating back to a brief war the two held in the late 1970s, as well as many others before that. Since that low point relations have improved and economic ties have developed, with Vietnam exporting raw materials like coal and coffee to its neighbour and importing machinery, fertilizers and chemicals. A rail link between the two countries has been constructed and investments have been made in each direction. However territorial disputes over the South China Sea remain active and the relationship remains uneasy, as the recent friction over a Chinese oil rig constructed close to the Vietnamese coast demonstrates.

Laos

Bordering China thia landlocked country has become closely aligned with its northern neighbour and trade has soared between the two countries over the last decade. Unfortunately much of the trade and investment is of the wrong kind. Illegal logging in Lao forests is a serious has a devastating environmental impact and illicit casinos springing up along the border in the country to cater for Chinese tourists are a growing criminal problem for both nations.

Legitimate Chinese investment has taken off in a big way across the country; most notably the Shanghai Wanfeng Group which has started the development of a US$1.6 billion shopping centre and tourist complex around the That Luang lake in the capital Vientiane. Another major project is China CAMC Engineering’s construction of a US$100 residential complex on the banks of the Mekong River.

Cambodia

Sino-Cambodia relations are particularly warm in comparison to its ASEAN neighbours. Cambodia has been the beneficiary of Chinese investment and aid, which has come with no awkward questions asked, an approach which is extremely popular with the questionable Phnom Penh regime, this stands in contrast to western donors such as the EU, who are more (but not always) insistent on the government respecting human rights and ensuring environmental protection.

In return Cambodia has backed China in disputes over the South China Sea much to the annoyance of its ASEAN neighbours. Chinese companies also view Cambodia positively, seeing it as an ideal location to locate textile manufacturing plants (“Made in Cambodia” labels are increasingly common in Western high street fashion chains) as well a source of cheap accessible land and natural resources. This has caused a great deal of conflict as Cambodians are often forcibly and illegally moved off their land to make way for new developments.

There are fears that Chinese funds will lead to further repression as the government will see no need to try and democratise or reform, the patronage of Beijing shielding them from internal and external criticism.

 



Categories: China Goes Global, Country Investment Analysis, Kula Ring Trade Blog

Tags: , , , , , , , ,

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: