BRI’s Effects on Foreign Investments: DID Test Based on China’s Greenfield Investments in 2005-2016

Lyu Yue (吕越)*

China Institute for WTO Studies, University of International Business and Economics (UIBE), Beijing, China

Abstract: This paper employs relatively more detailed and accurate data currentlyavailable from the Global Corporate Greenfield Investments Database 2005-2016 for anall-round analysis of the investment effects of the Belt and Road Initiative (BRI) based onthe difference-in-differences (DID) model as an effective identification method for eventevaluation. Our findings suggest that the BRI has sharply increased growth in outboundgreenfield investments by Chinese companies and led to an increase in the number ofinvestment projects in BRI countries by around 32%. A series of validity and robustness testshas demonstrated the existence of such positive effects. The BRI has facilitated greenfieldinvestments by Chinese companies through “five links,” i.e. infrastructure interconnection,policy communication, financial intermediation, trade, and people-to-people exchanges.Our heterogeneity analysis found that geographically, the BRI has played a more significantrole in facilitating investment growth in the Maritime Silk Road countries and China’sneighboring countries involved in the BRI, and no significantly positive effect exists forinvestment in economies with high political risks. From a dynamic perspective, the BRIstimulates investment by expanding the intensive margins, i.e. spurring investment growthin existing investment projects or economies home to those projects. Judging by the resultsof the difference-in-differences-in-differences (DDD) model, the BRI’s positive effects onoutbound investment are focused on infrastructure sectors such as energy, transportationand communication. In terms of the sources of investment, the BRI did not create anysignificant investment promotion effect for key Chinese provinces involved in the BRI..

Keywords: BRI, OFDI, DID, greenfield investment, “five links”

JEL Classification Code: F21, F55, O24

DOI: 10.19602/j.chinaeconomist.2022.1.02