China Approves $200 Million Loan for Funan Techo Canal, Boosting Cambodia's Infrastructure Ambitions

China has approved a $200 million loan to support Cambodia’s $1.2 billion Funan Techo Canal, the Council for the Development of Cambodia (CDC) said, ending nearly two years of uncertainty whether Beijing would support the flagship infrastructure project. The funding was made public by CDC First Vice President Sun Chanthol during an interview with Bloomberg last week when he outlined China’s financial support for the canal. The announcement comes shortly after two high-level visits to China by Prime Minister Hun Manet in early July and Senate President Hun Sen in June. “We received approval from China for a $200 million loan to build a ship lock and irrigation on the canal itself,” Chanthol said in the interview. “The term is very good, 1.25% interest for a 20-year loan period.” In addition, China will provide a $200 million grant to build six to seven bridges crossing the canal, while a syndicate of Chinese lenders will give a $1 billion loan to the concessionaire to cover the canal construction cost. The announcement signalled the first time China disclosed its financial contribution to the project since the groundbreaking ceremony of the canal in August 2024. It also followed the signing of five agreements related to the canal during Chinese President Xi Jinping’s state visit to Cambodia in April 2025, although the agreements did not specify the amount of Chinese financing at the time. Phnom Penh also revised its position on China’s role in the project, saying Beijing would foot 49% of the construction cost; previously stating that it would fully finance the canal. China remains one of Cambodia’s largest investment sources, particularly for major infrastructure projects. In the first half of 2026, Chinese investors accounted for the second-largest share of the 276 investment projects approved by CDC, following domestic investors, with a combined investment value of $4.7 billion. As of the end of the first quarter of 2026, Cambodia’s total public debt stood at $13.30 billion, of which $4 billion was owed to China. Chanthol said the canal would help boost economic growth, describing it as “a game-changer for inland waterway transport” in the country. Phan Rim, spokesperson for the Ministry of Public Works and Transport; Meas Soksensan, spokesperson for the Ministry of Economy and Finance; and Heang Sotheayuth, spokesperson for the CDC, did not respond to CamboJA News’ requests for comment. Seng Vanly, a Cambodian Asia-Pacific geopolitical analyst, told CamboJA News that the loan disclosure could be due to lengthy technical assessments, including detailed designs, cost calculations, and negotiations between Cambodia’s Ministry of Economy and Finance and Chinese financial institutions. He added that it could reflect a shift in the financing approach, with the government taking a more direct role in funding strategic infrastructure to maintain sovereignty and reduce future waterway service costs. The loan offers favorable financial terms for Cambodia, with low interest rate and long repayment period providing the government greater flexibility, he said. The canal project follows a public-private partnership (PPP) model, with private investors covering most investment and commercial risks, while the loan would support related public infrastructure. “Given the interest rate and the $200 million loan amount, Cambodia does not need to be overly concerned about a debt trap, as this amount is relatively small compared with the country’s gross domestic product and overall public debt, which Cambodia has been managing well,” he said. However, he urged the government to address social impacts before construction begins and establish complaint and mediation mechanisms to ensure fair resolution of land and compensation issues for affected communities. A new study by the NGO Forum on Cambodia (NGOF) found that the Funan canal project is expected to affect 2,305 households, or approximately 11,525 people, including 400 households facing full impacts from the project. The local community has also not received any information from the government, particularly details about compensation.