Can the Belt and Road Initiative Promote China’s Corporate Innovation？

Encouraged by the going out” policy in 2001 and the Belt and Road initiative in 2013, China’s outward foreign direct investment (OFDI) has spurred since the beginning of this century. For example, in 2016, the figure from Statistical Bulletin of China’s OFDI shows that China has become the world second largest OFDI source country after USA, with the outflow of OFDI reaching to 196.15 billion USD. However, with thousands of Chinese firms investing overseas, especially for those OFDI conducted irrationally and blindly, the risk of high leverage resulting from the failure of OFDI not only increase the pressure of repayment of debts, but also might infect national financial institutions, increasing the financial risk of national finance sector. There exists optimal leverage in firms, that is, targeted leverage, and therefore, whether the leverage for a firm is appropriate not only requires the focus of actual leverage, but also excess leverage, which is the deviation of actual leverage from targeted leverage. Extant literature shows that in China, targeted leverage varies with the ownership. Or precisely, state-owned enterprises (SOEs) have higher targeted leverage due to the implicit guarantee. Thus, firms with different ownership vary in excess leverage. Based on the above analyses, this paper examines the relationship between OFDI and excess leverage from the perspective of ownership.Taking China’s A-share listed firms from 2007 to 2015 as a sample, this paper shows that NSOEs with OFDI are more likely to have excess leverage than SOEs, and the higher the government level of SOEs, the greater the difference of excess leverage. Using OFDI samples, this paper also finds that the difference of excess leverage between NSOEs and SOEs only exists in the target technology seeking of OFDI. Further tests on the economic consequence of OFDI, the nature of property rights and excess leverage show that the excess leverage of NSOEs with OFDI compared with SOEs will reduce the enterprise value; during the period when government departments strengthen the risk supervision events of OFDI, the market reaction of NSOEs with excess leverage is worse than that of SOEs.This paper extends the research of OFDI’s leverage from the relationship between OFDI and leverage level to the relationship between OFDI and excess leverage, enriches the research in this field, and provides policy enlightenment for the government and financial institutions to assess the leverage risk related to OFDI and strengthen supervision. This paper finds that the excess leverage of NSOEs with OFDI will reduce the value of enterprises. Therefore, the government should pay attention to the excess leverage of NSOEs with OFDI, prevent the decline of enterprise value from causing its debt repayment crisis, and causing the financial risk of financial institutions.

This study analyses Chinese enterprises’ outward foreign direct investment (OFDI) from the perspectives of the Belt and Road Initiative (BRI) and home-country enterprise heterogeneity. It analyses the roles of BRI and the Asian Infrastructure Investment Bank (AIIB) in China’s OFDI using enterprise-level data for 2008–2017 from China Global Investment Tracker on Chinese enterprises’ OFDI in 128 countries. The results show that the roles of the BRI or AIIB in Chinese enterprises’ OFDI varies based on the ownership system of home country enterprises. BRI significantly affected the OFDI of central state-owned enterprises (SOEs) representing the national strategy, but not that of private enterprises. Interestingly, BRI implementation did not promote local SOEs’ OFDI significantly. Since local SOEs drive the local economy and obtain profits, they act similarly to private enterprises in investment selection.

PurposeThis study aims to explore the effect of the home country institutional environment on firms’ outward foreign direct investment (OFDI) and how it is affected by institutional environment differences across home country subregions. Drawing on transaction cost theory, this paper examined the relationship between the Belt and Road Initiative (BRI) and Chinese firms’ OFDI, as well as the moderating roles of local government officials’ career horizons and state ownership.Design/methodology/approachA sample of 5,018 Chinese firm-year observations with foreign investment activities was used over 11 years to estimate a panel-feasible generalized least square regression model.FindingsThe results show that the BRI improves Chinese firms’ OFDI in countries along the BRI route. Furthermore, this positive relationship is weaker for firms where provincial officials have longer career horizons and is stronger for state-owned enterprises (SOEs) compared to non-SOEs.Originality/valueThe findings confirm the positive effect of home country institutional environment on firms’ OFDI. Furthermore, the multiple government perspective offers new insight into the effects of the home country’s institutional environment on OFDI.

The Belt and Road Initiative (BRI) is an important strategy for China. This study examines the effect of political involvement on firms' outward foreign direct investment (OFDI) in belt‐road countries after the BRI. Using merged Chinese nonfinancial listed firm data, the fDi Markets database, and the Thomson One database (formerly known as SDC Platinum) for the period 2008–2018, we find that political involvement has positive effect on firms' OFDI in belt‐road countries after the BRI. Furthermore, we find that the positive effect is heterogeneous across state‐owned enterprises (SOEs) and non‐SOEs. Political involvement has a positive effect on M&A for SOEs and Greenfield investment for non‐SOEs in belt‐road countries after the BRI. Our findings suggest that political involvement promotes firms' OFDI in belt‐road countries after the BRI and is helpful to the macro‐policy implementation.

Does state ownership facilitate outward FDI of Chinese SOEs? Institutional development, market competition, and the logic of interdependence between governments and SOEs

To analyze the role of the Belt and Road Initiative in China’s OFDI by applying a double-difference model. To determine the accuracy of the model, using the skewed distribution matching method, and to determine the effect of OFDI in China’s coastal areas through practical tests. This paper adopts the DEA’s SBM model to study China’s green total factor productivity in 31 provinces; it evaluates China’s outward foreign direct investment (OFDI) through the use of three key indicators, including the currencies of the inflow countries, the currencies of the inward total, and exchange rate changes. The research in this paper considers various factors under the Belt and Road Initiative, including OFDI flows, reserves, and net flows. After an in-depth study, it is found that the Belt and Road policy significantly improves the mobility and sustainability of OFDI in the regions along the Belt and Road. This study may provide new perspectives for understanding the economic and social development patterns of provinces along the Belt and Road Initiative. Dissecting the complexity of regional development through the use of a "double split model" helps to recognize the different impacts of international projects on the local economy, and uniquely accounts for both spatial (geographic) and temporal (over time) variations in development, providing a robust framework for similar studies in other contexts.

Since the launch of the “Belt and Road Initiative” (BRI) in 2013, China’s outward foreign direct investment (OFDI) has grown rapidly. Moreover, the environmental protection issues introduced by these investment behaviors to BRI countries have attracted widespread attention from the international community. With the unbalanced panel data of 66 BRI countries from 2006 to 2020, this paper studied the impacts of China’s OFDI on the environmental performance of BRI countries from a systemic and partial perspective. We found that from a systemic perspective, China’s OFDI is conducive to the improvement of the comprehensive environmental performance of countries along the “Belt and Road”. From a partial perspective, the environmental performance influences of China’s OFDI in countries along the “Belt and Road” are threefold: (1) China’s OFDI can help mitigate climate change; (2) China’s OFDI improves wastewater treatment capacity; and (3) China’s OFDI has no significant impact on air quality. Therefore, China’s OFDI needs to continue its efforts to promote and improve the environmental performance of BRI countries to achieve their sustainable development goals. Some BRI developing countries should gradually change their extensive economic growth models; reduce their share of high energy-consuming, high-pollution, and inefficient industries in the national economy; and expand the proportion of their environmentally friendly industries while refraining from improving environmental performance by imposing high environmental pollution taxes.

PurposeThis study aims to determine how and through what mechanisms the outward foreign direct investment (OFDI) promotion effect of the Belt and Road initiative (BRI-OFDI) affects domestic investment. It is motivated by the context that China is fostering a new development pattern, as well as by the impetus from the Belt and Road initiative for the new pattern.Design/methodology/approachDrawing on data of Chinese-listed companies, this study uses a difference-in-difference method to explore the effect of the BRI-OFDI on domestic investment and a mediation model to illustrate the mechanisms.FindingsThe BRI-OFDI has a significantly positive effect on domestic investment, meaning that the Belt and Road initiative's OFDI promotion effect crowds in domestic investment. The results are heterogeneous: the crowding-in effect mainly exists in non-state-owned and technology-intensive enterprises, while a crowding-out effect is seen in state-owned and labor-intensive enterprises. The easing of corporate financing constraints and the expansion of market demand are two important mechanisms.Originality/valueThis study uses the Belt and Road initiative as an exogenous shock to investigate the impact of the initiative-induced OFDI promotion effect on domestic investment. It addresses the potential endogeneity issue confronting the studies on the relationship between OFDI and domestic investment in the literature. The authors focus on the possible spillover effects of the Belt and Road initiative discussing the impact of the BRI-OFDI on domestic investment from the micro-firm perspective. It offers a new perspective to objectively assess the initiative's policy effect.

This paper makes use of the panel data of China's direct investment in 61 countries along the ‘Belt and Road' from 2006 to 2016. Using the investment gravity model, we first carry out the total data regression, then the sample data regression based on the national income, the environmental reg- ulation intensity and the district position. The study found that, as far as the overall sample is con- cerned, the national environmental regulation along the ‘Belt and Road' has a significant inhibitory effect on China's Outward Foreign Direct Investment (OFDI), and the countries along the line are grouped according to income levels. Environmental regulations vary according to the differences in national income levels: environmental regulations in high income and intermediate-high income countries have a notable negative correlation with the OFDI of China, while environmental regula- tions in low-and middle-income countries have no significant impact on China's OFDI. According to the intensity of environmental regulation, the countries along the ‘Belt and Road' are grouped. The empirical results show that China's OFDI was significantly inhibited by countries whose national environmental regulations are higher than the Environmental Performance Index (EPI), while China's OFDI was not affected by the countries whose national environmental regulations are lower than the EPI. According to the different regional groupings of the host country, it was found that the environmental regulations of European countries and West Asian countries significantly inhibited China's OFDI, while the environmental regulations of the Middle East and North Africa and East Asian countries had no significant impact on China's OFDI.
 Some other important factors affecting China's OFDI should be taken into consideration, includ- ing the scale of the economy in the investment home country, the host country's economic level, strategic resources, infrastructure, government regulation, and bilateral trade tightness. Except for the government regulation level, which has an inhibitory effect on China's OFDI, the others have a strong promoting effect. This is consistent with the conclusions drawn by Qiu Qiang [2018]. The role of natural resources is not significant, indicating that China has insufficient incentives to natural resources along the ‘Belt and Road' countries.
 Finally, from the perspective of the government and enterprises, policy recommendations are pro- posed relevant to China's OFDI along the ‘Belt and Road'. The government should actively collect the measurement data of the host country's environmental regulations, carry out investment grading according to the strength of the environmental regulations and formulate different investment strat- egies accordingly. Chinese companies must pay attention to technology and innovation capabilities, which is conducive to reducing the extrusion of OFDI with similar technology levels.

Over the past five years, China’s ‘The Belt and Road Initiative’ strategy has brought about diverse interpretations and controversy since the 2013 Xi Jinping brought up the ‘Silk Road Economic Belt’ and ‘21st-Century Maritime Silk Road’ construction. There is positive public opinion and negative public opinion. Of course, the Chinese government also clearly recognizes that overcoming this negative public opinion is a key task in determining the success or failure of ‘The Belt and Road Initiative’. The Chinese government is extremely vigilant in recognizing ‘The Belt and Road Initiative’ along with Chinese expansionism or supremacy. For this reason, the Chinese government emphasizes the role of ‘People-to-people bond(民心相通)’ more than anything else. The purpose of this paper is to analyze the cultural policies and the progress of the Chinese government in relation to ‘The Belt and Road Initiative’ in the past five years, and to analyze its achievements and problems. The Chinese government’s foreign cultural policy aimed at countries along the Belt and Road is still focused on the direction of Chinese culture ‘Go global strategy(走出去)’. I think that if China continues this policy, it will be more difficult for the ‘People-to-people bond’. China’s foreign cultural policy in the 21st century was centered on two axes: cultural security and soft power. It is mainly in advanced countries, with strong regulatory policies on foreign cultural products and overseas expansion of Chinese culture. However, countries along the Belt and Road are mostly developing countries. Therefore, ‘one on one’ countries are also likely to look at China with the same perspective that China has for the advanced Western capitalist countries. From this point of view, China’s “The Belt and Road Initiative” cultural policy should be transformed dramatically in the future. If you want to borrow Chinese expression, the Chinese government should abandon its policy of ‘Go global strategy(走出去)’ Chinese culture abroad from a strategic point of view, and to focus on ‘Bring in (引進來)’ foreign culture into China. The Chinese government is not trying to force China to spread its values and to empathize with countries along the Belt and Road. Instead, it is trying to create a new era spirit in the process of actively experiencing and consuming the culture of countries along the Belt and Road.

We investigate the impact of China’s outward foreign direct investment (OFDI) on the export sophistication of countries participating in the Belt and Road Initiative (BRI). Through an examination of data spanning from 2010 to 2015, our findings reveal that China’s OFDI significantly enhances export sophistication in host countries, with a more pronounced effect observed in relatively poor BRI nations. However, the positive correlation between China’s OFDI and export sophistication diminishes in host countries characterized by elevated productivity levels. Utilizing a structural equation model, we identify host country productivity as a crucial mediating factor. The indirect technology spillover effects of China’s OFDI, facilitated through increased productivity, account for approximately 39% of their overall impact on export sophistication. Furthermore, we delineate threshold effects of productivity for China’s OFDI, demonstrating substantial positive effects in host countries with a GDP per capita below the first threshold (approximately US$1,141) or within the range of the first and second thresholds (around US$7,115). Upon consideration of these thresholds, distinctions in the effects of China’s OFDI between BRI and non-BRI host countries diminish. Our analysis underscores that the favorable influence of China’s OFDI extends beyond the BRI, providing benefits to low and middle-income countries globally.

This article takes the proposal of the Belt and Road Initiative (BRI) in 2013 as a quasinatural experiment, uses the difference‐in‐difference model and data on China's listed companies from 2010 to 2021 to examine the relationship between outward foreign direct investment (OFDI) and total factor productivity in the micro level. The empirical results show that after the BRI is put forward, enterprise investments in countries along the Belt and Road have a reverse ‘productivity effect’ at first, with the implication of being the strongest in 2015 but are no longer significant by 2017; furthermore, the BRI has a significant positive effect on the total factor productivity of enterprises in 2021. Potential irrational investments and low investment efficiency can better explain this phenomenon, as investment efficiency declined at the beginning of the BRI but steadily increased after 2019, which is consistent with the negative to positive ‘productivity effect’. Extended analysis and robustness tests support the above conclusions.

Since the Chinese government launched the Belt and Road Initiative, state-owned enterprises and private conglomerates have increased overseas investment. The massive outward foreign direct investment (OFDI) profoundly affects China's regional development to varying degrees. Existing studies have mainly investigated the effect of foreign direct investment inflow on domestic investment (DI), but only a few studies have examined the impact of OFDI on DI. Though most researchers have indicated that OFDI activities can promote (or inhibit) DI in a particular country, they have overlooked how OFDI's geographical distribution and motivation across the Chinese macro-regions have influenced DI. To fill these gaps, this paper examines the impact of such OFDI on DI in China and its macro-regions, using a province-level dataset from 2005 to 2021. It employs panel regression and rigorously tests the data using the generalised method of moments to address endogeneity issues. We also investigate the investment motivations of the top 100 Chinese multinationals with significant FDI outflows from 2015 to 2018. We find that OFDI has positively and markedly influenced DI in eastern coastal and central inland regions but not in western China. Though OFDI has positively affected DI in China, it may not hold in a regional context. Such OFDI seeks to enhance the efficiency of existing investment, expand domestic markets, and look for strategic assets. Our findings indicate that central and provincial governments could develop OFDI policies to cater to significant regional variations. Local governments should also consider the various OFDI motivations of Chinese multinationals and provide adequate support for developing and implementing local investment policies that encourage domestic firms to invest abroad.

This paper assesses the state of inward foreign direct investment (IFDI) and outward foreign direct investment (OFDI), as well as the direct and spatial impact of China’s Belt and Road Initiatives (BRI) on FDI and the degree of coordination synergy between IFDI and OFDI at the provincial level. The paper uses a discontinuous and spatial regression analysis covering 30 Chinese provinces between 2007 and 2019. The results suggest that China’s IFDI and OFDI development has achieved moderate coordination synergy over time. At the provincial level, the BRI has a positive direct impact on IFDI, OFDI and foreign investment coordination synergy. This indicates that with the BRI, China is able to improve OFDI flows and achieve better synergy in foreign investment coordination achieving a more balanced investment development path. Interestingly, the growth of OFDI at the provincial level also had a positive spatial spillover effect, while IFDI displaces domestic investment, the growth of OFDI is able to mitigate the displacement effects. However, the positive effect of BRI was only significant in the eastern region and not in the central and western regions. This indicates the heterogeneous nature of BRI effects, which limits the effectiveness of BRI in promoting FDI growth in China and its coordination synergy as an ambitious global policy.

China’s Belt and Road Initiative (BRI) has provided a broad stage for Chinese firms to speed up the pace of internationalization, especially for the energy sector. Through an analysis of 813 completed outward foreign direct investment (OFDI) cases by Chinese firms from 2005 to 2017 in the energy sector, this paper evaluated the relationship between Chinese OFDI and the energy structure of host countries. It was found that Chinese energy firms tend to invest when the host countries have higher energy efficiency and better industrial structure. Further it reveals the Belt and Road Initiative (BRI) has an obvious impetus to Chinese OFDI in the energy sector in related areas. This study fills the research blank on the motivation and location choice of OFDI in the field of energy, and an analysis on impact of new policy framework-BRI is focused. We believe our results are of importance to support firms’ decisions in OFDI.