Some argue that foreign direct investment (FDI) promotes economic growth through complementing domestic savings, transfer of technology, increasing competition, reducing prices, and stimulating entrepreneurship. At the same time, FDI has the potential to crowd out local firms, hamper inclusiveness, and use inappropriate technology, amongst other things. The expected benefits from technology spillovers have not always been evident, however. Moreover, FDI operations in the least developed countries (LDCs) tend to have inadequate safety standards, pollute the host countries and create “sweatshop” conditions. Thus, there is a need to call for better-targeted policies and regulations to ensure that FDI does more good than harm so as to promote a new win-win model for the host country and investors.Although Chinese direct investment was not found to have created a strong multiplier effect for both backward and forward linkages with other industries, it created a strong employment effect for the Cambodian people. Moreover, the competition/catching up effects on local firms appeared to be positive for all components of equipment & technology, management, skill development, and marketing, according to the survey of 308 local firms.While only 13% of the local firms surveyed sold their goods or services to Chinese firms, as high as 25% of the firms purchased inputs from Chinese firms. Moreover, 22% of the local firms in the sample felt competitive pressure from Chinese firms. However, this competitive pressure pushed them to work harder in upgrading their capacity in terms of machines/equipment, production techniques/processes, skills, management approaches, and marketing strategies. Overall, the horizontal linkages created a positive effect.