Highway to the forest? Land governance and the siting and environmental impacts of Chinese government-funded road building in Cambodia

Abstract

China is now the world’s largest official source of infrastructure financing to the developing world, providing more than $85 billion of financing annually. However, very little is known about the environmental risks posed by these projects. We study the siting and impacts of Chinese government-funded road improvements in Cambodia, where over the past two decades China’s state-owned banks have supplied more than $4 billion for 30 projects building, rehabilitating, and upgrading over 3000 km of major roadways. Cambodia’s forests contain some of the most biologically diverse habitats in the world, and they have experienced high levels of deforestation over the past two decades. We generate and subnationally geo-reference a dataset of Chinese government-financed road projects between 2003 and 2021. We first show that, unlike financing from the World Bank, Chinese government financing for road projects is disproportionately located in areas with more plantations and concessions. We then merge these data with two decades of satellite data on forest cover. Using the spatial and temporal roll-out of the highway improvements for causal identification, we find that these projects led to significant declines in forest cover, particularly in nearby plantations, where more than half of tree cover was lost. These effects are largest after the construction is completed, and driven by changes in market access for rubber plantations (mediated by shifts in global rubber prices).