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Cambodia is looking to reduce its reliance on China, its long-standing ally and largest foreign investor, as it seeks to shield its economy from the superpower rivalry between Washington and Beijing, its deputy prime minister has said.
China is Cambodia’s largest donor and trading partner, accounting for more than half of all investments into the country. It is also the largest source of raw materials for Cambodia’s export-focused manufacturing industry, making the latter vulnerable to US efforts to reduce Beijing’s role in global supply chains.
US President Donald Trump initially threatened Cambodia last year with 49 per cent tariffs — the highest rate after China. Phnom Penh has since managed to negotiate the levy down to 19 per cent, in line with its south-east Asian neighbours.
“We had a wake-up call when President Trump declared ‘liberation day’,” Cambodia’s deputy prime minister Sun Chanthol told the FT. “We cannot count on one country.”
Cambodia, which analysts have labelled a “Chinese satellite state”, has taken steps over the past year to strengthen ties with the US. South-east Asian countries have come under particular pressure from the US-China trade war, as the region has become an increasingly important manufacturing hub, largely thanks to companies relocating from China to reduce their exposure to US trade barriers.
Sun Chanthol warned that smaller countries “cannot afford to choose sides” in the US-China rivalry. “When elephants fight, you better get out of the way,” he said. “Cambodia can survive by not choosing sides.”
As part of that effort, Sun Chanthol said Cambodia was trying to diversify its portfolio of investors, seeking capital from the US, Europe and Brazil. In recent months, he has held investment roadshows in the US, Canada, Japan and South Korea.
He said Cambodia was also seeking export markets beyond the US, the largest destination for Cambodia-made goods such as trainers and sportswear, accounting for 40 per cent of its exports.
But Sun Chanthol said Cambodia was particularly focused on diversifying from Chinese investment and raw materials, as Phnom Penh expected further US action targeting Beijing, including strict requirements on the source of inputs for goods coming to the US.
The US has threatened levies as high as 40 per cent on Chinese goods “transshipped” via third countries, but has not specified how it will define such goods.
“We believe that the rules of origin might change, that the US might put a limit on which component, what percentage, comes from what country,” said Sun Chanthol, who led Cambodia’s trade negotiations with Washington.
He added that relations with the US had improved as “misunderstandings” about Cambodia’s Ream naval base had been cleared up. The US suspects Cambodia hosts Chinese naval forces at Ream, which is strategically located on the Gulf of Thailand. Cambodia and China have denied this.
Sun Chanthol pointed to port calls by Vietnamese and Japanese warships at Ream last year as evidence that the base was not used by the Chinese navy. He added that a US warship was expected to make a port call at Ream this year.
The US government did not immediately respond to a request for comment.
On top of a volatile geopolitical environment, Phnom Penh is also grappling with domestic challenges, including a long-running border conflict with Thailand and vast criminal cyber scam networks operating in the country. Both have affected tourism and hit economic growth, which the World Bank projects slowed to 4.8 per cent last year, compared with 6 per cent in 2024.
Sun Chanthol echoed recent pledges by Cambodia to crack down on cyber scams, saying the government took the issue “seriously”. Earlier this month, Phnom Penh arrested Chen Zhi, a Chinese national and chair of one of the largest scam operators, and sent him to China.
On the border conflict, violence broke out again last month after a peace accord brokered by Trump broke down. The two sides signed a ceasefire in the final days of 2025, which has held but remains fragile.
“We need to resolve this peacefully,” Sun Chanthol said. “Cambodia needs peace to build our country.”
Data visualisation by Haohsiang Ko in Hong Kong
