As Chinese manufacturers ramp up investment in this Cambodian border city, whole neighborhoods are cropping up to cater to them while signs emerge that factories are straining the power grid and labor market.
Bavet in Svay Rieng, more than three hours from Phnom Penh by car, is tucked into a corner of the country’s southeastern border where it juts into Vietnam.
Vietnamese was once commonly used in Bavet, but now the city is filled with Chinese-language signage, even in the back streets. Some cafes have staff that can speak only Chinese.
“Look. It’s China over there, China there, China here. Everything is China around here,” said a food stall owner with a wry smile.
Other changes have raised concerns, with the arrival of Chinese-funded casinos and reports of shootings and murders involving Chinese nationals.
“The Chinese are good investors, but I’m worried about safety in the city,” a taxi driver said.
The Bavet area has long had Chinese money flowing into its mainstay garment industry, but recent years have seen big investments in more electricity-hungry manufacturing of products such as tires.
In January, Wanli Tire broke ground on a new USD 500 million plant in Bavet, its first factory outside of China, which the company says will eventually be able to turn out more than ten million tires a year. It sits near a factory run by another big Chinese tire maker, Sailun Group.
More than ten of Cambodia’s roughly 30 special economic zones (SEZs) are concentrated around Bavet. Three new ones were approved there last year, all believed to involve Chinese funding, based on the project names.
SEZs offer tax breaks and other benefits to local and foreign companies. The Council for the Development of Cambodia approved 130 investments in these areas, of which more than 50 in the vicinity of Bavet.
Roughly 80% of investment in the Bavet area comes from mainland Chinese or Hong Kong companies, according to the Japan External Trade Organization (JETRO).
“Since Donald Trump was elected US president, moves into Cambodia have accelerated even more on concerns about tariff policy,” said Kohei Wakabayashi, chief representative of JETRO’s Phnom Penh office.
Much of Bavet’s appeal lies in its location—about four hours by land from Cai Mep-Thi Vai, Vietnam’s largest international port. By setting up shop across the border from Vietnam in Cambodia, companies can benefit from lower labor costs while still having access to an international port.
The route running from Cai Mep-Thi Vai through Bavet and across Cambodia into Thailand has been dubbed the Southern Economic Corridor, a concept put forward by the Asian Development Bank. The E1 expressway between Phnom Penh and Bavet was built with Japanese government support.
More recently, however, Cambodia has been tilting toward China’s Belt and Road Initiative, with highways and ports being built with Chinese money. State-owned China Road and Bridge Corporation is building a new expressway between Phnom Penh and Bavet, the same corridor spanned by the Japanese-funded highway.
Foreign direct investment (FDI) by China in the Association of Southeast Asian Nations (ASEAN) came to USD 17 billion in 2023, and totaled USD 140 billion from 2010 to that year, according to an ASEAN survey. China accounts for more than 10% of overall FDI in the bloc since 2020. In Cambodia, over 90% of garment factories are believed to be run by Chinese companies.
It has been estimated that SEZs being established around Bavet will need 50,000 or so workers once they are up and running. The government has said that Svay Rieng has a workforce of around 300,000, but Japanese companies estimate that only around 100,000 are within commuting distance of Bavet.
Some Chinese companies are reportedly recruiting workers from neighboring areas by offering pay equivalent to USD 300–350 per month, well above the Cambodian minimum wage of USD 208.
Power shortages are another concern. Some SEZs lost power last summer, leading the government to build a new substation. But outages reportedly began happening again around March, which has been blamed on an increase in power-hungry factories, as well as the area’s booming casinos.
The Trump administration announced a 49% “reciprocal tariff” on imports from Cambodia on April 2. Still, Chinese investment in the country shows no signs of easing.
On April 9, local media reported that a Chinese company will build Cambodia’s first oil refinery. Later that month, Chinese electric vehicle maker BYD held a groundbreaking ceremony for a vehicle assembly plant at the Sihanoukville SEZ in southwestern Cambodia.
“I am convinced that Wanli Tire’s investment will draw more Chinese companies to Cambodia,” said Cambodian deputy prime minister Sun Chanthol at the company’s January event.
This article first appeared on Nikkei Asia. It has been republished here as part of 36Kr’s ongoing partnership with Nikkei.