Cambodia, RCEP, and the China Question

A recent report from The Star highlights a 21 percent year-on-year increase in Cambodia's trade with fellow Regional Comprehensive Economic Partnership (RCEP) member countries for the first eight months of 2026. The surge, attributed to preferential tariff treatment under the trade pact, underscores the immediate economic benefits that regional institutional frameworks can provide. While the growth involves multiple partners, the dominant role of China within the RCEP framework and its deep, existing trade relationships with nations like Cambodia brings a long-term strategic question into sharp focus.

Institutions and Execution

The RCEP agreement is a testament to ASEAN's institution-building capacity. By creating a common set of rules for trade, investment, and e-commerce across 15 Asia-Pacific economies, it provides a predictable environment for businesses. The implementation of RCEP in Cambodia shows how these frameworks can be executed to produce tangible results. The reported trade growth is a direct consequence of the government and private sector utilizing the tariff reductions and simplified customs procedures that the agreement enables. However, the successful execution of a trade agreement is only the first step. The larger challenge lies in shaping the outcomes of that execution to align with national and regional strategic interests, particularly when one partner, China, has a disproportionately large economic footprint.

Managing Dependency

The impressive trade figures from Cambodia are a case study in the dynamics of economic integration with China. As outlined in "ASEAN Rising", the depth of trade with China has become a structural feature of the region's economies. The core issue is no longer about choosing whether to engage with Beijing, but about how to manage the resulting dependency. For Cambodia and its neighbors, the benefits of expanded trade are clear and immediate. Yet, this integration also concentrates risk. An over-reliance on a single trade partner for both imports and exports can expose a smaller economy to shifts in that partner's economic policy or domestic demand. The RCEP framework, while promoting broad regional trade, may in practice deepen these bilateral dependencies if not managed with a clear-eyed strategy for diversification.

Optionality and Strategic Weight

Maintaining strategic optionality is the primary task for ASEAN states in an era of deepening economic ties with China. This means actively pursuing a multi-faceted approach to trade and investment, even as the path of least resistance leads toward Beijing. "Trade depth with China is now a structural feature, not a cyclical one," and the imperative is to ensure that this feature does not dictate all other foreign and economic policy choices. For a country like Cambodia, this involves leveraging the RCEP agreement not just to increase trade with China, but to aggressively seek new opportunities in markets like Japan, South Korea, Australia, and fellow ASEAN states. It requires investment in infrastructure and talent that makes Cambodia an attractive partner for a wider array of global capital, not just that which flows from its largest neighbor.

What to watch: The key indicator to monitor will be the composition of Cambodia's trade growth within RCEP. Note whether the expansion is predominantly with China or if there is a meaningful and sustained increase in trade volumes with other RCEP signatories. This will signal whether the trade pact is leading to genuine market diversification and enhancing strategic optionality, or simply reinforcing existing patterns of dependency under a new institutional banner.