Chinese capital, regulatory strength and the BRI: A tale of ‘fractured development’ in Cambodia

Abstract

The scholarly debate on how developing countries can effectively manage Chinese-sponsored infrastructure and investment (particularly since the launch of the Belt and Road Initiative,BRI) has largely focused on cross-country variations. Less attention has been devoted to within-country variations: why can certain sectors within a country better align Chinese corporate activities with their domestic development objectives than others? This study examines within-country variations by comparing Sino-Cambodian infrastructure cooperation at the national level and Chinese investment in the gambling industry in Sihanoukville. It argues that the host country’s regulatory strength in combination with different varieties of capital determines the effectiveness of the government's attempts at achieving their development objectives. Using a case study approach based on primary interviews conducted in Phnom Penh and Sihanoukville, this article finds dramatically different outcomes in the two sectors under analysis. In the infrastructure sector, we find that the high regulatory strength deployed by the line ministry in conjunction with Chinese state capital achieves the government’s infrastructure development goals. On the contrary, in the gambling industry in Sihanoukville, limited regulatory strength of the local government coupled with profit-driven short-term capital create a ‘Chinese silo’ that yields limited (or even negative) developmental outcomes. Our analysis shows that regulatory strength can shape and affect the outcomes of foreign capital. These results are supported by the analysis of two shadow cases in manufacturing and real estate. We define this state of affairs as ‘fractured development’.