The multidimensional effects of host country sustainable development on China’s outward foreign direct investment: evidence from Belt and Road countries

This paper explores the effect of sustainable development levels in countries participating in the Belt and Road Initiative (BRI) on China’s Outward Foreign Direct Investment (OFDI). Through a systematic empirical analysis at both national and enterprise levels, the study examines how the sustainability of BRI countries influences China’s investment decisions. At the national level, the analysis reveals that higher levels of sustainable development in BRI countries positively impact China’s OFDI, with this relationship exhibiting a nonlinear pattern: low and high levels of sustainable development inhibit and promote OFDI, respectively. Additionally, natural resource availability plays a significant role in generating spatial spillover effects. Further examination at the enterprise level shows that the positive relationship between sustainable development and OFDI was particularly evident from 2013 to 2019; however, the onset of the COVID-19 pandemic in 2020 disrupted this trend. The heterogeneity analysis shows that state-owned enterprises tend to invest in countries with higher sustainable development levels, while industries like power, heat production, and wholesale retail are less sensitive to these levels. Additionally, host country participation in the Belt and Road Summit increases enterprises’ tolerance for variations in sustainable development, while leverage ratio and asset liquidity further influence OFDI. This study provides theoretical insights into the selection of BRI countries for OFDI and offers policy recommendations for enhancing the sustainability and risk management of China’s foreign investments.