What is the rationale behind China's infrastructure investment under the Belt and Road Initiative

Abstract

AbstractThis research presents a full picture of the rationale behind China's infrastructure investment under the Belt and Road Initiative (BRI), which was formally initiated in 2013. In this paper, we argue that the main reason for China to conduct infrastructure investment under BRI is to strategically respond to the emergence of the “New Normal,” which pushes the country to sustain economic growth through further structural transformation. We come up with three relevant factors for why infrastructure projects under BRI could be conducive to structural transformation in China's economy, as it (1) provides a much better alternative to the existing poor logistic conditions and can create accessibility among regions, (2) enables the smooth flow of factor endowments of production that significantly reduce production costs, and (3) indirectly strengthens the influence of the debt provider's home currency. This paper also provides three theoretical pillars: the comparative advantage following (CAF) and defying (CAD) development strategies, the late development theory with antineoliberalism characteristics, and the new international division of labor, from which these three factors might potentially explain how BRI could enhance the structural transformation of this second‐largest economy in the world.