CHINESE DIRECT INVESTMENT AND MACROECONOMIC DRIVERS OF GROWTH IN LAO PDR
DOI:
https://doi.org/10.14456/aamr.2026.3Keywords:
Chinese Direct Investment, Economic Growth, Autoregressive Distributed Lag, Trade Openness, Lao PDRAbstract
This study empirically investigates the macroeconomic determinants of economic growth in Lao PDR, focusing specifically on the impact of Chinese Direct Investment (CDI) alongside other key economic indicators. Utilizing the Autoregressive Distributed Lag (ARDL) model on annual data from 1996 to 2022, the research evaluates both short-run and long-run dynamics. The empirical findings demonstrate that CDI serves as a robust catalyst for economic expansion, consistently contributing to GDP growth through targeted capital inflows, the development of vital infrastructure, and substantial job creation, particularly in the hydropower and agricultural sectors. Furthermore, trade openness, workforce participation, and tourism emerge as significant positive drivers of sustained economic output. Conversely, general Foreign Direct Investment (FDI) exhibits inconsistent and occasionally negative impacts, underscoring critical vulnerabilities in institutional governance and absorptive capacity. While moderate inflation supports economic activity, excessive levels prove highly detrimental. To ensure long-term, sustainable, and highly resilient economic growth, policymakers must strategically diversify international trade partnerships, aggressively upskill the domestic workforce, effectively manage inflationary pressures, and systematically strengthen institutional governance to maximize future benefits from foreign investment.
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Copyright (c) 2026 Soukzana LADTAKOUN, Somchith SOMPASEUTH, Baoming LI
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