Chinese Outward FDI in Agriculture and Rural Development: Evidence from Northern Laos

Phanhpakit Onphanhdala and Terukazu Suruga

No 25, GSICS Working Paper Series from Graduate School of International Cooperation Studies, Kobe University

Abstract: China's outward FDI started when China opened up to the outside world in 1978. China, however, is not widely recognized as an important FDI exporting country until the discourse of its resource-seeking investment in Africa in recent years. Although most of outward FDI stock actually went just to one destination (Hong Kong), China has been increasing the investment in Asian and African developing countries sharply in recent years. However, the investment in leasing and business service, banking, and energy/mining sectors create fewer jobs. The small amount of investment in agriculture sector can have larger impacts on agriculture and rural development. There is a very limited existing study on how Chinese investment affects agricultural transformation and inequality in the process of rural development. This paper aims to fill that knowledge gap through a case study of Laos, a country where China's FDI has played a key role in economic development since 2000s. From the field surveys in Oudomxay Province, Northern Laos in 2009 and 2011, the results suggest that Chinese investment has emergently transformed the agriculture system from subsistence to commercial farming. There is evidence of a significant impact of Chinese investment on reducing the poverty level and income inequality. However, not all households and villages can receive these benefits. Uneven development among households and villages is fundamentally embedded in the starting period and the production choice with Chinese merchants.

Keywords: FDI; Agricultural Transformation; Rural Development; Poverty; Inequality; China; Laos (search for similar items in EconPapers)
JEL-codes: E22 I32 O13 O18 O53 Q12 (search for similar items in EconPapers)
Pages: 23 pages
Date: 2013-06
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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