The New China Syndrome?

Abstract: The view of FDI and its impacts has shifted throughout history. In conjunction with globalization and liberalization, new opportunities have emerged which have allowed FDI, in its current state to flourish across the globe. South-South FDI has emerged as a cross-border investment of developing and transitional economies to create lasting links with economies of similar structures. The purpose of this study is to explore the South-South FDI relationship between Laos and China since Laos’ economic liberalization in 1986. Chinese South-South FDI in Laos has seen a vast increase in the past decades, which has spurred the export of Laos and its economic development. As Laos aims to continue to fuel its economic development through FDI, utilizing it as a catalyst to support its export-led growth, this study also aims to examine the trends of trade and patterns from the same point of take-off. This study was conducted using a mixed-methods approach to provide a holistic and panoramic view of the relationship. The findings of the studies were analyzed using the conceptual frameworks of New Structural Economics and the role of FDI. Through the analytical discussion, the study suggests that a more skeptical or dirigist approach towards FDI is essential by the host government to achieve structural change and continues prosper development. Due to its nature, lack of diversification and ineffective enforcement is vital to thoroughly weigh the for and against argumentations of the current situation to adjust policy accordingly. To secure the economic base for the Laos economy, it is suggested to further diversify the FDI in Laos, to continuously improve industries across sectors to allow for the utilization of the country’s natural endowment for its economic development in the long run.