“The Unexamined Effects of China’s Belt and Road Initiative Outward FDI for Recipient Countries”
Abstract: China’s Belt and Road Initiative (BRI) was launched in 2013 and has led to cooperation projects in many developing countries and across a variety of sectors including infrastructure, energy, IT, and communications. During the last decade, China outward foreign direct investment (OFDI) as a share of worldwide OFDI has increased spectacularly since the BRI was proposed, from less than 5% in 2010 to nearly 20% ten years later. Previous studies have drawn the conclusion that BRI is a main driver of increased China OFDI and mergers and acquisitions (M&A). However, no studies have comprehensively explored the impact of China OFDI and M&A on the decision of other countries to invest in BRI recipient countries. Using a panel dataset between 2003 and 2020, this study analyzes the extent to which China OFDI and M&A have affected the willingness of FDI and M&A donors to invest in BRI recipient countries, as well as identifies and examines country characteristics and other factors that may attract and dissuade FDI and M&A donors. This analysis finds that China OFDI and M&A had a significant, and positive, impact on stimulating more FDI and M&A contributions from other than China for both BRI recipient countries and non-BRI countries. However, the result is not significant in the BRI countries subgroup. BRI has a positive impact on attracting more FDI from countries other than China for recipient countries, but, for M&A, it has no significant impact. This study is the first to provide a broad, cross-sectional analysis of the impact of China OFDI on FDI inflows into recipient countries.