Cambodia’s Tightrope Act: The Hun Sen Dynasty’s Struggle for Survival Between China, the U.S., and the Underworld

An Economy in Free Fall

Despite an official economic growth rate of around 5% in 2024—a figure that, as in previous years, remains highly unevenly distributed—Cambodia’s financial health is in free fall, burdened by a toxic mix of mounting debt, a collapsing real estate sector, and dwindling foreign investment. The country now suffers from the world’s highest level of consumer debt relative to income—more accurately, survival debt, as much of the population struggles to make ends meet.

Adding to the crisis, an unprecedented agricultural downturn has left farmers in a desperate fight for survival, with no viable markets for their produce due to longstanding government incompetence and neglect. Meanwhile, the once-thriving tourism industry has sharply declined, as international visitors continue to shun Cambodia over its deteriorating reputation and the perceived risks associated with criminal organizations, further deepening the country’s economic woes.

All of this is unfolding at a time when Cambodia’s natural resources, including forests and mineral reserves, have been severely depleted by years of overexploitation and systemic corruption, leaving the nation with even fewer avenues for economic recovery.

As a result, a record number of Cambodians are fleeing the country in search of work abroad, particularly in Thailand, where more than two million registered and unregistered Cambodian migrant workers now reside—a staggering number for a country of just 17 million people, and one that continues to grow. This mass exodus reflects the severity of Cambodia’s economic crisis, as families facing plummeting revenues and insurmountable debt see migration as their only survival option.

The China Trap: A Shrinking Lifeline

For years, China’s financial backing has been Cambodia’s economic lifeline, offering massive, need-tailored loans that come without democratic or human rights conditions. But this lifeline is shrinking:

• Beijing has slashed its infrastructure investments, refusing to finance even high-profile projects like the Funan Techo Canal, a pet project of the ruling family.
• No new Chinese loans were approved for Cambodia in 2023 and 2024, signaling a major shift in Beijing’s financial strategy.
• Chinese investors and tourists, once a key pillar of Cambodia’s economy, have not returned in significant numbers since the COVID-19 pandemic.

With Western aid and investment drying up due to Cambodia’s increasing authoritarianism, Phnom Penh has fallen into a vicious cycle of dependence on Beijing. But China is no longer willing to bankroll Cambodia indefinitely, forcing the ruling elite to cede more and more strategic advantages to Beijing, particularly in the military sphere—an arrangement that has provoked growing U.S. hostility.

China’s Growing Demands: The Ream Naval Base and U.S. Pressure

Knowing that Cambodia has no viable alternatives, Beijing has escalated its demands. The most contentious issue is the Ream Naval Base, where China is suspected of gaining de facto military control.

• For Beijing, Ream represents a crucial strategic asset for expanding China’s military reach in Southeast Asia, directly challenging U.S. dominance.
• For Washington, the idea of a Chinese military port in Cambodia is unacceptable, intensifying tensions between the U.S. and Cambodia.

The U.S. has continuously pressed Cambodia for transparency on Chinese military involvement at Ream, but Phnom Penh’s evasive answers have only reinforced American suspicions.

In a desperate bid to appear neutral, Cambodia recently offered to restart the U.S.-Cambodia Angkor Sentinel military drills, hoping to create the illusion of balancing both superpowers. But Washington is unlikely to be fooled by such symbolic gestures.

A Dangerous Pact with the Underworld

With Chinese loans shrinking and U.S. sanctions tightening, Phnom Penh has turned to a more dangerous source of funding: the Chinese Mafia and its vast cyber scam network.

The scam industry, which operates out of Cambodia’s casino hubs like Sihanoukville, generates an estimated $12.5 billion annually, equivalent to a third of Cambodia’s formal economy. This illegal enterprise has become an economic pillar for the ruling elite, whose corrupt networks benefit from billions in illicit funds.

• The Chinese Communist Party, under pressure from its own citizens, wants the Cambodian regime to crack down on these cybercrime operations, which have defrauded tens of billions of dollars from ordinary Chinese. Beijing is increasingly embarrassed by these worldwide criminal activities attributed to its nationals, which not only tarnish China’s global image but also fuel domestic outrage.
• The U.S. also demands a crackdown, as Americans have lost at least $100 million to Cambodia-based scam operations. More importantly, fighting organized crime worldwide remains a U.S. priority, and Washington is increasing pressure on Phnom Penh to dismantle these criminal networks.

However, cracking down is not an option for Phnom Penh. If the regime truly dismantled the scam networks, Cambodian oligarchs, ruling party elites, and senior military officials would lose access to billions in dirty money. Moreover, the economic collapse resulting from such a crackdown could destabilize the government itself.

This has placed Cambodia in an inescapable trap:

• If it submits to China’s demands and shuts down the scam industry, it loses billions in revenue, threatening the regime’s financial survival.
• If it refuses, it risks further angering Beijing, which may cut off all remaining support—leaving Cambodia completely isolated.

A Balancing Act That Cannot Last: Squaring the Circle

The Hun Sen dynasty is now trapped between geopolitical fire and economic disaster, facing what can only be described as an impossible dilemma—like squaring the circle, where no solution can satisfy all sides.

The regime’s long-standing strategy of playing China and the U.S. against each other is rapidly breaking down as:

• China grows impatient with Cambodia’s failure to control the scam industry while demanding more military and economic concessions.
• The U.S. escalates its crackdown on Cambodian corruption and illicit finance while refusing to lift sanctions or restore aid.
• The domestic economy continues to deteriorate, forcing more Cambodians to flee to Thailand for work while the regime clings to power through increasingly authoritarian measures. At the same time, millions of ordinary Cambodian families, struggling with plummeting revenues, are unable to meet their debt obligations and will not accept having their assets seized, creating the potential for social unrest and deepening instability.

Phnom Penh is now stuck in a self-perpetuating cycle of repression, dependence, and economic decay, where every option leads to more instability. Like the ancient problem of squaring the circle, Phnom Penh’s predicament defies resolution. The question is no longer whether the current Cambodian regime can continue playing both sides, but how long before the entire system collapses under its contradictions.

[Photo by Milei.vencel, CC BY-SA 3.0, via Wikimedia Commons]

The views and opinions expressed in this article are those of the author