China and the World

A maritime alliance

Chinese investors pile into first Cambodian IPO

A maritime alliance

Look Hu is coming to town

By the finish of the first day of trading at the new Cambodian Securities Exchange on April 18, shares in the country’s first ever IPO – the Phnom Penh Water Supply Authority – had soared by nearly 50%.

Stock exchange bosses were delighted, although by day two they seem to have had a rethink.

“Although the share price was allowed to increase 50% yesterday, daily increases and decreases will be capped at 5% starting today,” they informed investors. That meant trading was suspended within an hour, as the water stock soon reached 9,750 riel ($2.44), the Phnom Penh Post reported.

Amid the excitement, Chinese website also noted that half the investors in the IPO were Chinese citizens or of Chinese descent. And with two more IPOs set for this year – Telecom Cambodia and Sihanoukville Autonomous Port – there may be more opportunities for that share to grow.

Like most southeast Asian nations, Cambodia has a prominent ethnic Chinese business community. But whereas other Southeast Asian nations have been wary of Beijing – Vietnam, the Philippines and now Burma all look for commercial benefit but also keep a cordial distance from the giant to the north – Cambodia’s Prime Minister Hun Sen has been much more enthusiastic in maintaining closer ties.

Earlier this month Hu Jintao spent four days in Cambodia, to be greeted by billboards welcoming him and his wife. It was the first time a Chinese president had visited the country for 12 years and during the trip Hu and Hun Sen issued a joint communique saying they would strengthen cooperation in politics, economy and defence.

Specifically, they agreed to double bilateral trade to $5 billion by 2017. Xinhua also reported that China has already committed $1.43 billion of investment into Cambodia. It has been prominent in roads and dams, with Beijng the leading financier of Cambodia’s ambitious hydropower programme.

Traditionally, China has bolstered its relations with the Cambodians as a counterweight to Vietnamese influence in the region.

But Xinhua also notes that Cambodia’s present chairing of ASEAN has been beneficial for the Chinese in keeping formal discussion of political tensions in the South China Sea off the agenda at the multilateral organisation.

China is known to want to negotiate separately with each country on the issue, leveraging its political and economic strength against the smaller nations individually. That means avoiding discussion in a forum such as ASEAN, where the others may try to forge a common position, something that the Philippines has now started to push for more actively.

Cambodia “takes a fair attitude” towards the South China Sea issue, Xinhua remarked approvingly, while Reuters also reported that Hu Jintao had used his trip to ask Hun Sen not to push for talks on the topic “too fast”.

Hun Sen’s pro-China stance is not without its critics in Cambodia, where China has not always been admired as a positive influence.

Most notoriously, Mao Zedong armed the Khmer Rouge, which killed about 1.7 million Cambodians between 1975 and 1979. During this murderous period, there are said to have been at least 15,000 Chinese advisers in Cambodia, and Beijing’s support allowed the regime to survive longer than many anticipated.

Eventually, the United Nations brokered an end to the vicious civil war and UNTAC then oversaw peacekeeping efforts, as well as elections between 1992 and 1993, as China stood aside.

But Hun Sen seized power in another coup in 1997 and Western donors withdrew their support. China returned, taking up much of the financial slack and rekindled close relations.

“China talks less but does a lot,” Hun Sen told reporters during Hu’s visit.

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