Cambodia-China trade increases by 26%, but challenges loom

[geovalin]

KT - Chea Sokunthea

 

Cambodia’s trade with China surged by 26% in the first half of 2025, topping $9.2 billion despite structural concerns over long-term sustainability, according to new data from the General Department of Customs and Excise.

 

The bulk of this growth was driven by Chinese exports to Cambodia, which rose 31.2% year-on-year to $8.52 billion. By contrast, Cambodia’s exports to China fell nearly 8%, totalling $750 million — a gap that underscores Phnom Penh’s continued dependence on Chinese goods, particularly machinery, electronics, and manufacturing inputs.

 

Experts say the figures reflect both the strength and imbalance of the bilateral relationship. Cambodia remains a key node in China’s supply chain, serving as a low-cost manufacturing hub that benefits from tariff-free access under the Cambodia-China Free Trade Agreement (CCFTA), which came into force in 2022.

 

“Cambodia has become a favoured investment destination due to its competitive production costs,” said Lor Vichet, Vice President of the Cambodia Chinese Commerce Association. But he warned that this advantage masks deeper vulnerabilities. Most of Cambodia’s exports — garments, footwear, and travel goods — are made with imported raw materials, mainly from China.

 

This reliance could soon become problematic. Cambodia’s status as a Least Developed Country (LDC) gives it broad trade privileges, but these are set to expire by 2029. Once reclassified, it will face stricter sourcing rules to qualify for preferential access in Western markets.

 

“We have about four years left to build domestic capacity,” Vichet said, urging investment in local production of inputs like fabric, zippers, and leather. Without this shift, Cambodia risks losing its competitive edge.

 

He also highlighted the country’s untapped potential in agriculture, noting that current exports to China in that sector remain minimal. Diversifying beyond textiles could help stabilise trade and reduce overreliance on any single market or sector.

 

Despite the challenges, officials remain optimistic. With improved logistics and deepening integration through initiatives like the Belt and Road and RCEP, Cambodia’s trade with China is expected to maintain its momentum — but sustainability will hinge on reforms that move beyond assembly-line economics.

 

-2025-07-17