The Analysis Of The Economic Effect Of China's Foreign Direct Investment In Laos

In order to promote economic development,the Lao government was promoting the economic development by attracting foreign capital inflows.Since China put forward the "Belt and Road Initiative" in 2013,the Lao government and people have been very optimistic about this prospect.The proposal of "One Belt and One Road" also brings a golden opportunity for the economic development of Laos.Moreover,China is already the largest source of foreign capital in Laos.China's FDI in Laos has promoted the rapid economic development of Laos with a certain extent.Therefore,we systematically study the economic effects of China's foreign direct investment in Laos from the perspective of economic growth and industrial structure using the latest data,which will help Laos' s government and scholars understand more accurately the impact of China's foreign direct investment on Laos' s economy.With a view to providing theoretical and practical reference for the Laos government to perfect its foreign investment laws and regulations and formulate more reasonable preferential policies.Firstly,this paper systematically reviews the economic growth and the industrial structure effect from foreign direct investment to the target countries,as well as the existing research results on the foreign capital attraction in Laos.It also analyzes the theories of FDI,FDI and economic growth theory,FDI and industrial structure theory.On this basis,we first have a more comprehensive understanding of the economic development of Laos from the aspects of GDP,industrial structure,trade and urbanization.Then,we analyze the scale of FDI,industrial flow,regional distribution from both the global and China levels in Laos.Finally,we use the data from 2003 to 2016 to make an empirical analysis of the economic growth effect and industrial structure effect of FDI in Laos.It is found that China's foreign direct investment in Laos can significantly promote the economic growth of Laos through the establishment of the error correction model(VECM).The impact of China's foreign direct investment in Laos on the three sub-industries is positive,but the impact has different degrees,from largest to smallest are: the tertiary industry,the primary industry,the secondary industry.In view of the above empirical results,we can conclude that,on the one hand,the Laos government needs to further increase its efforts to attract foreign capital including those from China;on the other hand,it needs to pay more attention to reasonable and effective guidance when it comes to allowing foreign capital to enter into Laos.This article puts forward a series of countermeasures and suggestions from the aspects of politics,infrastructure,emerging agriculture,education and culture,and hopes that Laos will improve its domestic investment environment and market environment so that FDI,including China,can further promote the economic and social development of Laos development.