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Harmony in Diversity: Can the One Belt One Road Initiative Promote China’s Outward Foreign Direct Investment?

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  • Lili Kang

    () (School of Business Administration, Shanghai Lixin University of Accounting and Finance, Shanghai 201209, China)

  • Fei Peng

    () (Department of Economics, Shanghai Lixin University of Accounting and Finance, Shanghai 201209, China)

  • Yu Zhu

    () (Economic Studies, University of Dundee School of Business, Dundee, DD1 4HN, UK)

  • An Pan

    () (School of Business Administration, Shanghai Lixin University of Accounting and Finance, Shanghai 201209, China)

Abstract

This paper investigates the effect of the One Belt One Road (OBOR) initiative on China’s outward foreign direct investment (OFDI) using a dataset of all host countries for the period of 2010–2015. The employed econometric technique combines a difference-in-differences estimator with matching techniques. The results show that China’s OFDI in OBOR countries is about 40% higher than in non-OBOR countries. After the initiative, the OFDI from China increases by 46.2% in OBOR countries. However, after controlling for the heterogeneity across OBOR and non-OBOR countries using the matching approach, the significance of the increasing effect caused by the OBOR initiative disappears. We also find the OBOR initiative diminishes the resource-seeking motivation and improves the market-seeking motivation of China’s OFDI. Our results cast doubts on the infrastructure-led and institution-based strategy of the OBOR initiative, but support the boosting effect of the OBOR initiative on institutional cooperation and cultural convergence. Thus, the OBOR initiative is a sustainable continuation and development of the long tradition of economic, institutional, and cultural convergence with the OBOR countries, rather than a temporary policy shock.

Suggested Citation

  • Lili Kang & Fei Peng & Yu Zhu & An Pan, 2018. "Harmony in Diversity: Can the One Belt One Road Initiative Promote China’s Outward Foreign Direct Investment?," Sustainability, MDPI, Open Access Journal, vol. 10(9), pages 1-28, September.
  • Handle: RePEc:gam:jsusta:v:10:y:2018:i:9:p:3264-:d:169449
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    1. repec:gam:jsusta:v:11:y:2019:i:8:p:2189-:d:222128 is not listed on IDEAS
    2. repec:gam:jsusta:v:11:y:2019:i:5:p:1321-:d:210516 is not listed on IDEAS
    3. repec:gam:jsusta:v:10:y:2018:i:12:p:4632-:d:188376 is not listed on IDEAS

    More about this item

    Keywords

    One Belt One Road (OBOR); outward foreign direct investment (OFDI); cultural distance; institutional distance; treatment effect models;

    JEL classification:

    • Q - Agricultural and Natural Resource Economics; Environmental and Ecological Economics
    • Q0 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - General
    • Q2 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation
    • Q3 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation
    • Q5 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products

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