The Consequences of China's FDI for Kyrgyzstan’s Labor Market

• In Event: Plural Pathways: Chinese Investment, Communist & Post-Communist Developmentalism

Abstract

Despite massive foreign direct investment (FDI) around the world, there is much we do not know about the consequences of such investment on the political economy of the host country and consequences for domestic politics. Previous research suggests that FDI improves local development by promoting economic growth. The effect of foreign investments on workers’ welfare and ultimately domestic politics is still controversial. This paper explores this issue, by analyzing Chinese FDI in Kyrgyzstan, which constitutes a significant part of this small country’s economy. Investment in Kyrgyzstan is concentrated in mining and infrastructure construction. Using geolocated data from household panel surveys, listed firms, and labor strikes in Kyrgyzstan from 2010 till 2020, I investigate the impact of foreign infrastructure and natural resource investment on (1) worker well-being and (2) ultimately domestic politics. By comparing state-owned and foreign firms, Chinese and Western foreign firms, this paper expects that FDI provides higher wages and better insurance coverage but does not necessarily benefit local workers because of in-immigrant competition, health issues, labor strikes, and inequality. Investment from Chinese firms face more strikes and foreign labor issues.

Author

• Pengshan Pan, Graduate School of Public and International Affairs