Debt sustainability in Belt and Road Initiative recipient countries

This paper examines the direct and spatial impacts of the Belt and Road Initiative (BRI) on China’s OFDI globally and tests the moderating effect of the BRI, considering economic development, resources and institution quality for 186 countries from 2008 to 2019. The results imply that the BRI has significantly improved China’s OFDI globally, with a much larger effect in Asia and Africa. This study finds that institutional quality has no direct impact on OFDI, with the exception of the corruption index, where China’s OFDI seem to favour countries with higher corruption. However, when institutional quality is used as an interactive term that controls heterogeneity, the results suggest that institutional quality significantly strengthens the effects of the BRI on OFDI. In other words, in countries that engage with BRI, higher institutional quality positively improves the attractiveness of China’s OFDI. The results also reveal that the impact of the BRI is moderated by higher levels of economic development but not by resource-rich host countries. Interestingly, the increasing Chinese OFDI in BRI countries has a spatial suppression effect on OFDI in non-BRI countries, suggesting industrial agglomeration effects due to the BRI. The results are validated by various robustness tests, and this study concludes with policy implications.

This study uses country-level panel data covering 64 countries in the Belt and Road Initiative (BRI) for the period 2003–2015 and employs a dynamic panel system generalized method of moments (GMM) model with instrumental variable regression techniques to investigate empirically the impact of China’s outward foreign direct investment (OFDI) on trade intensity with BRI countries. The study finds that China’s OFDI on average has a positive impact on import intensity and a negative impact on export intensity with BRI countries. However, the impact of China’s OFDI on its trade intensity with BRI countries varies by country groups of resource-rich, high-income, and low-income countries in different periods. The regression results for different periods show that since the BRI was launched in 2013, China’s OFDI has strengthened bidirectional trade relations between China and BRI countries.

Evaluating the impact and heterogeneity of China's OFDI on total-factor carbon emission performance in Belt and Road Initiative countries

Direct investment cooperation between China and countries along the Belt and Road Initiative (BRI) has achieved initial success under the BRI framework. To examine how the institutional environments of these host countries influence China’s outward foreign direct investment (OFDI), this paper conducts an empirical analysis using the system GMM model, based on data from China’s OFDI in 55 BRI countries from 2005 to 2020. The findings reveal three key insights: First, China’s OFDI in the BRI region exhibits a distinct"risk-seeking"tendency toward institutional quality—that is, poorer host-country institutional environments are associated with higher Chinese investment, alongside a preference for geographically proximate destinations. Second, institutional preferences vary significantly across regions, with Asian countries attracting relatively more investment. Third, the significance of host-country institutional environments on China’s OFDI has not diminished since the official launch of the BRI in 2013.

Innovation and OFDI along the Belt and Road

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.

The effect of China’s outward foreign direct investment on carbon intensity of Belt and Road Initiative countries: A double-edged sword

PurposeIn an attempt to satisfy the desire to become a global economic leader, China is working on a series of ambitious deals with several countries. As a major country in a region considered as an emerging market, the immense infrastructure gap that is curtailing trade and accessibility for economic growth has led to major changes in economic policy. The past few decades have seen China invest billions of dollars not only in the developing countries of Africa and Asia but also in other world economic giants of Europe and the USA. China has embarked on a rigorous global effort to close the infrastructure gap through the Belt and Road Initiative (BRI) in partnership with multilateral development banks. China’s BRI brings together several countries in East Asia and the Eurasian mainland into close proximity with China, thereby promoting inland trade between the countries. The investments in this project are estimated to reach US$1tn over a span of ten years. However, the volume of outward foreign direct investments (OFDI) from China to the host countries is determined by several factors. Several previous researchers have studied various issues affecting the business activities of China and the given countries. First, the cultural organization, policy approaches and objectives of China as a country create trade barriers with countries involved in the BRI plan. This paper aims to provide a comparative overview of how the institutional distance of the Belt and Road countries from China affects their sustainable development.Design/methodology/approachData on the nature, success and challenges of the BRI (such as the volume of bilateral trade and OFDIs and its financial implications) were extracted from various published studies. The impact of cultural distance and internationalization of the BRI enterprise was analyzed through a comparative research methodology.FindingsA significant relationship exists between institutional distance and sustainable development of the Belt and Road countries. However, the barriers – for example, inhospitable culture and regulations for organizations in participating countries – could become pillars of success once resolved.Originality/valuePrevious studies lacked a standard framework to investigate how institutional distance is related to China’s outbound trade with the Belt and Road countries. The comparative analysis methodology adopted in this study fills this gap.

Purpose: This study aims to critically examine Kazakhstan's involvement in China's Belt and Road Initiative (BRI), challenging prevailing realist interpretations and exploring the nation's agency within the framework of this expansive development strategy. By analysing the multifaceted nature of the BRI and its impact on Kazakhstan's economic development, the research seeks to provide a nuanced understanding of the initiative's implementation and outcomes.Research Methodology: The study employs a matrix approach to analyse the BRI's functions and sectors, with a particular focus on Kazakhstan. This methodology involves the creation of two comprehensive matrices: one delineating the overall BRI framework and another specific to Kazakhstan's engagement. The matrices were developed through an extensive literature review, expert consultations, and iterative refinement. This approach allows for a systematic examination of how various BRI functions manifest across different sectors, providing a structured framework for understanding the initiative's scope and impact.Originality: This research contributes to the existing literature by offering a constructivist perspective on Kazakhstan's involvement in the BRI, countering dominant realist narratives. The study's originality lies in its development of a novel matrix approach to BRI analysis, which provides a comprehensive and nuanced view of the initiative's multifaceted nature. Furthermore, the research challenges prevailing misconceptions about the BRI, particularly the notions of 'debt trap diplomacy' and China's purported rigid plan for global dominance.Research Findings: The study reveals that Kazakhstan has effectively leveraged the BRI to its national advantage, utilising open-ended multi-vector policies to selectively engage with the initiative. Contrary to realist interpretations, the research finds that agreements between Kazakhstan and China are based on mutual benefit and equal footing. The economic development impacts of the BRI on Kazakhstan are found to be largely positive, advancing the nation's progress across various sectors. The study also highlights the complex and less cohesive dynamics of BRI implementation, challenging the notion of a monolithic Chinese strategy. Additionally, the research demonstrates that BRI funding helps address the infrastructure gap in developing nations, offering alternative investment opportunities with fewer conditionalities than traditional Western-led initiatives.

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.

This paper focuses on China's outward foreign direct investment (FDI), arguably one of the most prominent forms of 'new' capital entering the Association of South East Asian Nations (ASEAN) in recent times, not least since the Belt and Road Initiative (BRI) was announced by Chinese President Xi Jinping in 2013. Despite initial warmth and hopes for Chinese capital to uplift the economies of the region, recent years have witnessed some high profile pushback against China by some ASEAN members. Key concerns include but are not limited to new, often project-related concerns as well as old, if unspoken, fears that 'China is buying the world' through a spate of 'debt trap diplomacy'. This paper aims to shed light on this issue, focusing on China's outward FDI into ASEAN. Through an analysis of statistical information, it shows that Chinese FDI in ASEAN economies is considerably 'smaller' than what popular rhetoric suggests. Firstly, Chinese outward FDI, while increasing in value, is not more significant than the region's traditional investors, mainly Japan and ASEAN itself. Secondly, the quality of Chinese outward FDI is considerably less sophisticated and sustainable than what is commonly expected. Much of it is directed towards tertiary industries such as real estate activities, which contain a rather speculative element.

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.

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 paper investigates the effect of the One Belt One Road (OBOR) initiative on China’s outward foreign direct investment (OFDI) using a dataset of all host countries for the period of 2010–2015. The employed econometric technique combines a difference-in-differences estimator with matching techniques. The results show that China’s OFDI in OBOR countries is about 40% higher than in non-OBOR countries. After the initiative, the OFDI from China increases by 46.2% in OBOR countries. However, after controlling for the heterogeneity across OBOR and non-OBOR countries using the matching approach, the significance of the increasing effect caused by the OBOR initiative disappears. We also find the OBOR initiative diminishes the resource-seeking motivation and improves the market-seeking motivation of China’s OFDI. Our results cast doubts on the infrastructure-led and institution-based strategy of the OBOR initiative, but support the boosting effect of the OBOR initiative on institutional cooperation and cultural convergence. Thus, the OBOR initiative is a sustainable continuation and development of the long tradition of economic, institutional, and cultural convergence with the OBOR countries, rather than a temporary policy shock.

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.