Research On Sovereign Debt Risks Of The "Belt And Road Initiative" Countries

With the continuous promotion of the "Belt and Road Initiative"(BRI),significant progress has been made in policy coordination,infrastructure connectivity,trade and investment,financial integration,industrial capacity cooperation,economic growth,and people-to-people exchanges,among other areas.However,there are also negative voices in the international community regarding the "Belt and Road" Initiative.Western countries led by the United States occasionally throw out the "debt trap theory","excess capacity theory","China model export theory","China pollution transfer theory",and attempt to warn relevant countries not to cooperate with China.Since the outbreak of the COVID-19 pandemic,the global economic recovery has slowed down,the trend of "anti-globalization" and trade protectionism has intensified,geopolitical conflicts have continued,and under the influence of multiple factors such as the global monetary tightening cycle,the debt risks of developing countries along the Belt and Road have continued to accumulate,and their debt vulnerabilities have become more pronounced,posing significant challenges to their debt sustainability and external liquidity.A few Belt and Road countries have defaulted on their sovereign debts,and Western countries have repeatedly raised the "debt trap theory," further increasing uncertainty about the BRI and posing higher requirements and more severe challenges to its high-quality and sustainable development.Against this backdrop,how to monitor and warn of the sovereign debt risks of Belt and Road countries? Does the BRI affect the sovereign debt risk of countries along the Belt and Road? How does BRI investment affect the avoidance of sovereign debt risks? How to strengthen debt and risk management in BRI construction? These are urgent key issues that need to be studied.The main focus of this article’s research is as follows: Firstly,constructing an analysis framework for the sustainability of sovereign debt,theoretically analyzing how the "Belt and Road" initiative affects the sovereign debt risk of countries along the Belt and Road,and proposing relevant research hypotheses.Secondly,a model for predicting sovereign debt defaults is constructed,and the sovereign debt risk values of countries along the Belt and Road from 1984 to 2021 are calculated and analyzed.Then,starting from the impact of distinguishing the authenticity of the "debt trap" theory,the sovereign debt risk is measured based on the default probability estimated in the sovereign default warning model constructed in this article.The impact,heterogeneity,and intermediate mechanisms of the "Belt and Road" initiative on the sovereign debt risk of countries along the Belt and Road are analyzed.Finally,targeted policy recommendations are proposed to provide reference for effectively preventing potential sovereign debt risk issues in the cooperation of the BRI.The main conclusions of this study are as follows: Firstly,variables such as reputation,GDP per capital,external debt-to-GDP ratio,exchange rate,political factors,foreign exchange reserves,the ratio of total domestic credit to GDP,actual GDP volatility,the ratio of the current account to GDP,inflation rate,and US Treasury yields are important factors affecting sovereign debt default.Secondly,the implementation of the "Belt and Road" Initiative has not only not increased the sovereign debt burden of countries along the Belt and Road,but has also promoted economic growth through investment cooperation,thus improving the government’s ability to repay debt and reducing sovereign debt risk.This conclusion validates China’s impact and contribution to the world economy and indicates that foreign media’s promotion of the "China model" conspiracy theory is contrary to the facts.Thirdly,China’s outward foreign direct investment(OFDI)reduces sovereign debt risk in Belt and Road countries by promoting their economic growth." Unimpeded trade," is the important mechanism through which China’s OFDI reduces the sovereign debt risk of Belt and Road countries.Fourthly,the study clarifies the impact of sovereign debt risk on China’s investment in Belt and Road countries,thus providing targeted recommendations and measures for Chinese companies’ investments under different risk conditions.Based on this,recommendations are proposed at the government,enterprise,and financial institution levels to improve the BRI debt governance mechanism and risk management capabilities,and to promote the sustainable and high-quality development of the BRI in the new situation.The marginal contribution of this article is mainly manifested in the following five aspects: Firstly,adopting scientific and effective policy evaluation methods such as the double difference method and the synthetic control method to assess the impact of the "Belt and Road" Initiative on the sovereign debt risk of Belt and Road countries,providing reliable empirical evidence to refute the Western "debt trap" theory.Secondly,starting from the perspective of "Five Connectivity"(Policy coordination,Facilities connectivity,Unimpeded trade,Financial integration,and People-to-people bond)and conducting a comprehensive and in-depth analysis of the deep-rooted reasons for the impact of the "Belt and Road" initiative on the sovereign debt risk of countries along the Belt and Road,advancing the research from "what" to "why".Thirdly,the sample scope of the sovereign debt default warning model studied in this research is wider.In terms of sample selection,the sovereign debt default database compiled by the Bank of Canada and the Bank of England is used,and the statistical time of default events is updated to 2020,which supplements the sample size and greatly extends the sample’s timeliness.Fourthly,the warning model based on the random forest constructed in this article has good warning performance.Comparing the Logistic regression model and the random forest model in experimental tests,it is found that the random forest model has significant advantages in improving accuracy,reducing the error rate,and performing well in practical applications.Fifthly,considering economic factors,debt factors,international financial factors,political factors,reputation factors,and other influencing factors,a relatively complete sovereign debt default risk warning index system is constructed to comprehensively and systematically measure the sovereign debt risk of Belt and Road countries.