Harmony in diversity: Can One Belt One Road initiative promote China’s OFDI?

Lili Kang, Fei Peng, Yu Zhu, An Pang

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    30 Citations (Scopus)
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    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.

    Original languageEnglish
    Article number3264
    Number of pages28
    JournalSustainability
    Volume10
    Issue number9
    DOIs
    Publication statusPublished - 12 Sep 2018

    Keywords

    • Cultural distance
    • Institutional distance
    • One Belt One Road (OBOR)
    • Outward foreign direct investment (OFDI)
    • Treatment effect models

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