During the last ten years, China has consciously engaged countries located in its two bordering peninsulas - the Indochinese and the Korean. In both cases, economic relations, in general, and investment, in particular, have been used as an important media for engagement. As a result, the level of China's economic relations with the three countries in Indochina - Cambodia, Laos, and Vietnam have improved considerably.
In 2006, China's investment in Laos amounted to US$498 million, more than 158 times a decade ago. In 2007, China overtook Thailand as Laos' overall top investor with 45 out of total 117 investment projects that came to Laos. Simultaneously, according to Xinhua News Agency, in 2007, China regained its previous position of overall top investor to Cambodia with a total of 284 projects totaling over US$1 billion (China enjoyed the status of top investor from 2003 to 2005 except in 2006 when it was South Korea. In 2005, Chinese state-owned and private companies invested 460 per cent more over 2004. In Vietnam, according to China's Ministry of Commerce, China is the 14th ranked investor in 2008. Though the ranking fails to show China's investment in Vietnam in a significant way, it certainly reflects an upward trend in the bilateral economic relations. China's capital investment in Vietnam was about US$120 millions in the 1990s and then increased ten-fold to nearly US$1.2 billion between 2000 and 2007.
China's investment in the Indochina Peninsula reflects certain definitive trends. First, Chinese investment has mainly occurred in raw materials, mining and infrastructure and plantations. Laos, currently with 35,100 hectares of rubber trees, has farmed out its border area's rubber plantation to the Chinese and Vietnamese on its northern and eastern borders respectively. Luang Nam Tha province in the Laotian northwest has the largest amount of total hectares under rubber cultivation. In 2007, according to the National Agriculture and Forestry Research Institute of Laos (NAFRIL), more than 10,000 hectares of rubber had been planted. Compared to 400 hectares in 1994, it is a remarkable growth. China has also invested in hydroelectric plants, mining, rubber plantations, telecommunications, construction materials, hotels and restaurants. In Cambodia, most Chinese investments are in the garments and construction industries, as well as mining and electricity production. In May 2007, China's biggest steel mill, Baosteel Group Corp. along with three other top Chinese companies decided to explore for iron ore in Cambodia. Chinese investments in Vietnam are also mostly in raw materials such as coal and bauxite, and in constructing roads and rails that will make connect these neighbours. Chinese investment in the raw material sector further highlights the strategic importance Beijing has accorded to these initiatives given the greater degree of state regulation over these sectors.
Second, Chinese investment initiatives have received further stimulus from government policies. Since 1999, under its 'Go Out' strategy, the Chinese government has encouraged local firms to go abroad. China's investment in Indochina has increased considerably in the field of raw materials. In tandem with the strategy, Chinese politicians also made strong engagement initiatives with respect to these countries. In 2000, the President Jiang Zemin paid an official visit to Laos and Cambodia, the first by a Chinese head of state to each country and after these symbolic visits, high-level exchanges have continued. China and Cambodia also set up an economic and trade cooperation committee in 2000.
Finally, Chinese non-interference with the internal affairs of other countries together with its goodwill policy toward each of the governments is another feature of significance. Vietnam, as one of the last communist countries in the world, has improved relations with China; 2008 was targeted as the year to finish their border demarcation. As Cambodian Minister of Commerce, Cham Prasidh said in an interview with Los Angeles Times on 17 September 2007 that "China has proven different from other donors. They don't impose conditions. Others say you have to do this with human rights and you have to do with democratic reforms.". Similarly, unlike its experience with other donor countries and international agencies that asked Laos to reform legal, finance and mainly political system in return for economic aid, Laos has found China giving without applying pressure for internal reform.
Their political similarities and Chinese goodwill policies toward each of the Indochinese countries has helped bring about full-fledged bilateral relations. With two wings - economic and political - China's relationship with Indochina bring about a more peaceful environment around China as well as strengthen's China's influence in the region.