A Study On The Effect Of China 's Direct Investment On The Industrial Structure Of Laos

China and Lao PDR are amicable neighboring countries; both countries have developed close cooperation in political, economic and cultural fields. Depending on geographic and personal advantages, Lao PDR is a popular destination for Chinese investors. Chinese FDI mainly concentrates on sectors like mining, agriculture, hydropower and industry, and brings funds and advanced technology for Lao’s economic and social development, and makes contributions to Lao’s industrial development to some degree. Now, in order to improve the development of open economy and promote the implementation of "the Belt and Road" strategy, China are vigorously prompting the cooperation of international capacity and equipment manufacturing. In 2015, the State Council introduced interrelated document, defining neighboring countries as the prior areas. Lao PDR, with its geographic advantage and the strong desire for cooperation, can be seen as a key country for promoting international capacity cooperation. The main purpose of this essay is to study to the effect of Chinese FDI on Lao’s three industries.Firstly, this essay sorts out the theories and literatures relating to industry and FDI, Secondly, the essay analyzes the current situations of Lao’s industrial structure, the situations of Chinese FDI on Lao PDR from the aspects of investing quantity and investing industrial structure, and the mechanism of the impact of Chinese FDI on Lao’s three industries. Thirdly, this essay measures the degree of the impact the Chinese FDI on Lao’s industries from the fund supply and technology progress. In the aspect of fund supply, by using grey correlation, this essay comes to a conclusion that the impact of Chinese FDI on Lao’s secondary industry is the biggest and the primary industry the smallest. In the aspect of technology progress, by calculating the TFP of Lao’s three industries and using OLS model, this essay comes to conclusion that Chinese FDI has a significantly positive effect on the technology progress of Lao’s secondary industry, a mildly positive effect on primary industry and a significantly negative effect on tertiary industry. Last, according to the related theories and empirical results, this essay brings out some countermeasures and suggestions of improving Chinese FDI’s positive impacts on Lao’s industrial development.