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Impacts of trade liberalization with China and Chinese FDI on Laos: evidence from the CGE model

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  • Phouphet Kyophilavong
  • Michael C. S. Wong
  • Somchith Souksavath
  • Bin Xiong

Abstract

The Lao-Chinese railway will be completed by 2020. It is a strategic route of China’s One-Belt-One-Road policy to reach out to South-East Asia, linking Kunming and Vientiane. Surrounded by Thailand, Myanmar, Cambodia, Vietnam, and China; Laos is small economy with a population of 6.90 million in 2014. It has been one of least developed economies in the world for several decades. With increased trade liberalization and FDI, Laos has robust GDP growth in the past two decades. In particular, the amount of FDI in Laos quickly jumps by more than 100% in 2014, because of massive increases in Chinese FDI. This paper summarizes major policies in Laos on trade liberalization and FDI and applies Computable General Equilibrium model to estimate how trade liberalization with China and Chinese FDI would affect Laos in terms of economic performance, outputs on various sectors, and poverty reduction. Our results show the following interesting findings: (a) both have positive impacts on overall economic performance; (b) some sectors in Laos have their outputs declined by trade liberalization with China; (c) both have positive impacts on reducing poverty in Laos but Chinese FDI is more able to narrow income gap in the country.

Suggested Citation

  • Phouphet Kyophilavong & Michael C. S. Wong & Somchith Souksavath & Bin Xiong, 2017. "Impacts of trade liberalization with China and Chinese FDI on Laos: evidence from the CGE model," Journal of Chinese Economic and Business Studies, Taylor & Francis Journals, vol. 15(3), pages 215-228, July.
    • Handle: RePEc:taf:jocebs:v:15:y:2017:i:3:p:215-228
    DOI: 10.1080/14765284.2017.1346923
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    References listed on IDEAS

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    Cited by:

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    4. Alves, Ana Cristina & Gong, Xue & Li, Mingjiang, 2023. "The BRI: A new development cooperation paradigm in the making? Unpacking China’s infrastructure cooperation along the Maritime Silk Road," World Development, Elsevier, vol. 169(C).
    5. Jiyong Chen & Dabo Chen & Aiping Yao, 2020. "Trade development between China and countries along the Belt and Road: A spatial econometric analysis based on trade competitiveness and complementarity," Pacific Economic Review, Wiley Blackwell, vol. 25(2), pages 205-227, May.

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