China’s One Belt and One Road Initiative and Outward Chinese Foreign Direct Investment in Europe

Abstract

For the last few years, the execution of the Belt and Road Initiative (hereinafter referred to as the BRI) and China’s outward foreign direct investment (hereinafter referred to as OFDI) in Europe have seen a significant upward trend. For our current paper, we collected empirical data pertaining to China’s OFDI and foreign trade (gathered from 21 European countries in the trade gravity market for the period 2003 to 2016) that yielded the following results: (a) China’s OFDI to Europe has significantly promoted international trade between China and European countries. On the other hand, OFDI has equally promoted China’s exports to European counties, while it has not encouraged China’s imports from European counties. (b) The Belt and Road Initiative has had a positive impact on China’s exports to European counties and has had a negative impact on China’s imports from European counties. (c) There have been both complementary trade impacts and substitution trade impacts when China has directly invested in European countries, but the complementary impact was much stronger than its substitution impact in the chosen sample period.

Analysis of the Bri and China’s Ofdi in Sub-Saharan Africa

“…Also, Mundell develops the argument that international trade and capital flows may substitute for each other based on the theoretical framework of the Heckscher-Ohlin model which assumes that even if two countries have the same production function, the differences in their factor endowments would cause international trade and capital flows to substitute each other, based on the factor endowment ratio theorem (Lu et al, 2018). This is because FDI would be one of the mechanisms of foreign capital inflows and used to boost the manufacturing industry and trade structure for global convergence (Ma et al, 2019). This part of the reviews of the literature studies summarized the impacts of OFDI on foreign trade in both developing and developed countries.…”

“…Second, BRI had a positive effect on Chinese exports to Europe and negatively influenced Chinese imports from European counties. Third, Chinese OFDI in Europe had both complementary and substitution trade effects in European countries; however, the complementary influences much stronger effect (Ma et al, 2019). Recently, Shahriar et al 2019drew a gravity model to show the determinants of Chinese OFDI in the BRI countries for 12 years of the period from 2005 to 2014 by incorporating additional control variables.…”

“…In this study, only the impact of Chinese OFDI and trade in the Sino-Africa economic linkages following the promotion of BRI in SSA was investigated. This is due to the trade and financial integration (especially OFDI) with SSA countries have been identified among the key and crucial pillars of the BRI economic strategy to improve Chinese external sectors and facilitate the conducive business environment (Huang, 2016;Lu et al, 2018;Li and Zhu, 2019;Ma et al, 2019). Indeed, in the past three decades, Chinese overseas investment has faced three phases of development: from "restricted", (2000-2016) "relaxed", and (2017 onwards) "regulated" (Wang and Gao, 2019).…”

“…Shahriar et al (2019) found that the host country's market size was the major determinants of Chinese OFDI in the BRI countries. Others Ma et al (2019) and Lu et al (2018) reported that Chinese OFDI and the BRI had equally promoted the bilateral trade between Chan and the BRI countries. Herrero and Xu (2017) suggested that landlocked European Union countries had considerably more benefits from the BRI in terms of trade.…”

Does Chinese Inward Foreign Direct Investment Improve the Productivity of Domestic Firms? Horizontal Linkages and Absorptive Capacities: Firm-Level Evidence from Ethiopia

“…Globally, governments, policy makers, corporations, and the scientific community are determining that FDI is among the factors for transforming strategic decision-making to achieve the SDGs [3]. Intensely targeting sustainable development has crucial drawbacks for developing countries, and FDI can bring about sustainable socio-economic development for resource-poor countries [4]. Moreover, the UNCTAD has also promoted FDI as being amongst the potential drivers for sustainable development and the safest type of investment for today's developing economies [5].…”