2016 CEA-China: A Focus on internationalization in China (CEA-China 2016)

7 / 2016-03-30 17:49:15

Foreign Direct Investment and China’s “Belt and Road Initiative”: A cooperative institutional Perspective

foreign direct investment, “Belt and Road Initiative”, cooperative institution, investment environment

At present, foreign countries are skeptical and cautious toward China’s “Belt and Road Initiative”, or the Silk Road Economic Belt and the 21st Century Maritime Silk Road plans. It is still controversial and the literature about China’s “Belt and Road Initiative” in economics and political science is inconclusive. This paper analyzes the strategic intents, characteristics, key points, difficulties and possible solutions. Using data from 46 countries contained by “Belt and Road Initiative” for 2006-2014, we analyze the existed diversified cooperative institutions which included free trade agreement(FTA), economic cooperation agreement(ECA), bilateral investment treaty(BIT), international investment agreement(IIA) and others, we get the following conclusions: first, the diversified cooperative institutions can play important roles in attracting and protecting foreign direct investment, but the effects varies among different countries; second, countries contained by “Belt and Road Initiative” must have the essential domestic institutions which can interact with diversified cooperative institution to make these commitments credible to other countries’ investors. However, if countries merely reply on diversified cooperative institutions while ignoring domestic investment environment, the effects of attracting foreign direct investment are limited and cannot be sustained. In this paper, we provide empirical evidence to support these conclusions and the result is robust to changes in estimation method and model specification.