Abstract
For the last few years, the execution of the Belt and Road Initiative (hereinafter referred to as the BRI) and China’s outward foreign direct investment (hereinafter referred to as OFDI) in Europe have seen a significant upward trend. For our current paper, we collected empirical data pertaining to China’s OFDI and foreign trade (gathered from 21 European countries in the trade gravity market for the period 2003 to 2016) that yielded the following results: (a) China’s OFDI to Europe has significantly promoted international trade between China and European countries. On the other hand, OFDI has equally promoted China’s exports to European counties, while it has not encouraged China’s imports from European counties. (b) The Belt and Road Initiative has had a positive impact on China’s exports to European counties and has had a negative impact on China’s imports from European counties. (c) There have been both complementary trade impacts and substitution trade impacts when China has directly invested in European countries, but the complementary impact was much stronger than its substitution impact in the chosen sample period.
Highlights
For more than two millennia, different trade and business routes, jointly called the “Silk Road”, have played a pivotal role in promoting international communication, business, and trade across the world, in terms of the communication between two different parts of it: China and Europe
We used the panel data of China’s Outward Foreign Direct Investment (OFDI) in European countries, the trade flows between China and Europe from 2003 to 2016, and the trade gravity model to empirically examine the effect of China’s overseas investment in Europe on bilateral trade
The main results of the empirical research are as follows: (a) China’s OFDI to Europe significantly promotes international trade between China and European countries, but the promotion effect of OFDI on total trade largely consists of the promotion of exports from China
Summary
For more than two millennia, different trade and business routes, jointly called the “Silk Road”, have played a pivotal role in promoting international communication, business, and trade across the world, in terms of the communication between two different parts of it: China and Europe. In 2013, China’s president, Xi Jinping, proposed building the “Silk Road Economic Belt” and the “21st Century Maritime Silk Road”, known as the “Belt and Road Initiative” (BRI). This initiative involves infrastructure construction and seeks to establish a widespread setup for economic cooperation, policy cooperation, trade and business collaboration, and everlasting cultural cooperation [1,2]. One study has said that the BRI is a sustainable continuation and economic expansion of long-term economic and institutional cooperation rather than a temporary policy shock within the “Belt and Road” countries [3].
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