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Policy, institutional fragility, and Chinese outward foreign direct investment: An empirical examination of the Belt and Road Initiative

Author

Listed:
  • Dylan Sutherland

    (Durham University)

  • John Anderson

    (University of Northern Iowa)

  • Nicholas Bailey

    (University of Northern Iowa)

  • Ilan Alon

    (University of Agder)

Abstract

The Belt and Road Initiative (BRI) is an important policy agenda undertaken by the Chinese government. We explore how the BRI – as well as an associated policy, the creation of Chinese overseas special economic zones – influences Chinese outward foreign direct investment (FDI). We find that host-country institutional fragility positively influences Chinese FDI volumes, and that the impact of institutional fragility on Chinese inward FDI to the host is amplified in the presence of the BRI. Specifically, BRI policy facilitates FDI to countries with weaker rule of law and less government accountability. We argue that, while the BRI may actively facilitate economic growth (i.e., via infrastructure development), and in turn aspects of human development, particularly in less-developed economies, its likely impacts on political rights may not be so promising.

Suggested Citation

  • Dylan Sutherland & John Anderson & Nicholas Bailey & Ilan Alon, 2020. "Policy, institutional fragility, and Chinese outward foreign direct investment: An empirical examination of the Belt and Road Initiative," Journal of International Business Policy, Palgrave Macmillan, vol. 3(3), pages 249-272, September.
    • Handle: RePEc:pal:joibpo:v:3:y:2020:i:3:d:10.1057_s42214-020-00056-8
    DOI: 10.1057/s42214-020-00056-8
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    9. Fon, Roger & Alon, Ilan, 2022. "Governance, foreign aid, and Chinese foreign direct investment," LSE Research Online Documents on Economics 113678, London School of Economics and Political Science, LSE Library.
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    11. Nugent, Jeffrey B. & Lu, Jiaxuan, 2021. "China's outward foreign direct investment in the Belt and Road Initiative: What are the motives for Chinese firms to invest?," China Economic Review, Elsevier, vol. 68(C).
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    20. Henglong Zhang & Houlin Song & Conglei Hou, 2023. "How Do Overseas Economic and Trade Cooperation Zones along the Belt and Road Affect the Economic Growth of Host Countries?," Sustainability, MDPI, vol. 15(4), pages 1-18, February.
    21. Li Yuanyuan, 2023. "Impacts of the Belt and Road Initiative on regional outward FDI from China based on evidence from 2000 to 2015," ZFW – Advances in Economic Geography, De Gruyter, vol. 67(1), pages 20-32, May.
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    24. Fei Nie & Jian Li & Xiaoli Etienne & Gucheng Li, 2023. "Impact of Outward Foreign Direct Investment on Chinese Manufacturing Firms' Financialization and Servitization," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 31(2), pages 112-136, March.

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