The Promotion Effect of the Belt and Road Initiative on China’s Foreign Direct Investment: An Empirical Analysis Based on Firm Level

Abstract

Based on the dataset of listed companies in China from 2014 to 2017, this study uses difference in differences (DID) and propensity score matching (PSM) approaches to systematically evaluate the promotion effect of China’s Belt and Road Initiative (BRI) on Chinese firms’ outward foreign direct investment (OFDI). The empirical findings are as follows: (a) after the initiative, listed Chinese firms have significantly increased OFDI in countries along the Belt and Road, but this result cannot be clearly attributed to the implementation of the policy; (b) compared with firms that have already invested in countries along the Belt and Road, the initiative has strongly encouraged uninvested listed firms to invest along the BRI routes; (c) the new entry incentives of OFDI firms have industry differences in investment choices; (d) the shareholding ratio of state-owned investors has no impact on the policy effect. Based on the findings, we put forward some policy recommendations to help firms invest in the countries along the Belt and Road better.