This paper provides an initial qualitative assessment of the impact of China’s Outward
Foreign Direct Investment on local workers and firms in Cambodia and Vietnam. Based
on interviews with 60 Chinese investors plus further interviews with other foreign investors
and domestically owned firms in the manufacturing industries of the two countries,
the study assesses employment and income effects, training, spillovers, and linkage effects.

The analyses show that the positive effects of Chinese manufacturing investment have
been limited, while negative effects have not been observed. Chinese firms have a strong
positive impact on the domestic workforce, but little interaction with local firms, which
reduces the potential gains from spillovers. This contrasts with UNCTAD’s expectations,
but is in line with findings on industrialised-country FDI and shows that the impact of any
investment, whether or not Chinese, is constrained by existing host-country conditions.
The findings suggest separate policy recommendations for the local economy in Cambodia
and Vietnam to derive greater benefit from this investment.