China has canceled all foreign debt it is owed by Cambodia. The move came at on the sidelines of an Asian summit gathering in Phnom Penh.
Cambodian Prime Minister Hun Sen said the Chinese move to write off all of Cambodia's debt was beyond his expectations.
Chinese Prime Minister Zhu Rongji made the announcement in Phnom Penh, ahead of Monday's opening of the summit of Association of Southeast Asian nations (ASEAN).
Neither Chinese nor Cambodian officials would disclose the amount owed to Beijing. However, Some analysts recently speculated it could be about eight percent of Cambodia's $3 billion national debt burden. Others say it could be at least one-third of the total debt.
Political Scientist Carl Thayer of the University of New South Wales said Beijing appears to be aiming to bolster its influence in the region, even though it already has strong ties with Cambodia. "China found the best way of dealing with ASEAN is to build up strong bilateral relations, and then be able to play on the differences among ASEAN countries. So, yes, it is a method of influencing Southeast Asia. Cambodia, under Hun Sen, has been closer, and China takes advantage of that," Mr. Thayer said.
Relations between China and Cambodia have been close but rocky at times. Beijing once backed the communist Khmer Rouge, believed to have been responsible for the deaths of some 1.7 million people during its four-year rule.
The country is still struggling to rebuild, after decades of civil war, and depends on foreign donors.
The Chinese and Cambodian prime ministers also signed a multi-million dollar aid package. China, which is not a member of ASEAN, is taking part in the summit as a regional partner.