The Belt And Road Initiative And China Outward Foreign Direct Investment

The Belt and Road Initiative plays a signification role in Chinese enterprises investing overseas.China hopes to strengthen cooperation and build trust with countries along the Belt and Road,in order to export its capacity of production and infrastructure construction.With the free flow of production factors,it is possible to achieve a win-win situation by driving the employment and economic growth of the host country and promoting sustainable economic development.The initiative has been issued for 6 years and starts to come into effect.Yet the effectiveness of the initiative has not been fully studied.This paper first elaborates each theory of International Direct Theorry system,and expounds the promotion mechanism of the initiative from five-pronged approaches.Then in empirical part,this paper uses the data of the China's OFDI statistics published by the Ministry of Commerce and of the world bank database.The initiative is regardes as a quasi natural experiment and DID method is used to analyze the promotion effect in of the Initiative.The result of the research shows that the Belt and Road initiative has generated the growth of China's OFDI in those initiative countries,with the growth rate of 38.4%higher than that of non-initiative countries.The result has pssed the robusness test including placebo test and parallel trend test.After the host country level variables are added,it is found that China's OFDI prefers the countries of higher GDP but lower GDP per capita,which indicates high level of production and low level of labour price.Mostly emerging economies and developing countries fit this feature.Countries with lower tax rate are also peferred by Chinese enterprises for tax avoidance is always an important consideration.Further study finds that the host country's high level of government effectiveness will exert a positive impact on OFDI,while strict regulatory quality shows the negative.The rule of law indicates positive correlation,meaning that sound legal constraints can attract OFDI and reduce investment risk.The influence of corruption control is not significant.In heterogeneity analysis,this paper finds that the initiative has posed investment promotion effect more in the areas like the land countries of silk road,the neighboring countries and the countries in East and Southeast Asia,Central Asia and West Asia.The implementation of the initiative has brought in OFDI.For the maritime countries of silk road,non-neighboring countries and countries in South Asia,Central and Eastern Europe and the Commonwealth of Independent States,the effect is relatively insignificant.China's investment in such areas will take time to result in the further cooperation.With the cooperation keeps deepening among the initiative countries,China's OFDI will enter a new stage.