Impact of the Belt and Road Initiative on China’s Inward and Outward FDI and Investment Coordination Synergy

This paper assesses the state of inward foreign direct investment (IFDI) and outward foreign direct investment (OFDI), as well as the direct and spatial impact of China’s Belt and Road Initiatives (BRI) on FDI and the degree of coordination synergy between IFDI and OFDI at the provincial level. The paper uses a discontinuous and spatial regression analysis covering 30 Chinese provinces between 2007 and 2019. The results suggest that China’s IFDI and OFDI development has achieved moderate coordination synergy over time. At the provincial level, the BRI has a positive direct impact on IFDI, OFDI and foreign investment coordination synergy. This indicates that with the BRI, China is able to improve OFDI flows and achieve better synergy in foreign investment coordination achieving a more balanced investment development path. Interestingly, the growth of OFDI at the provincial level also had a positive spatial spillover effect, while IFDI displaces domestic investment, the growth of OFDI is able to mitigate the displacement effects. However, the positive effect of BRI was only significant in the eastern region and not in the central and western regions. This indicates the heterogeneous nature of BRI effects, which limits the effectiveness of BRI in promoting FDI growth in China and its coordination synergy as an ambitious global policy.