Foreign Direct Investment and Maritime Transportation Infrastructure: Competition Effects Under the Belt and Road Initiative

ABSTRACT In this paper, we analyse the determinants of maritime connections, with a special focus on the importance of foreign direct investments (FDI) in improving maritime transportation networks and in restructuring them. We are also interested in how China, in particular, impacts countries' integration to global supply chains through maritime transportation. We work on a heterogeneous panel of bilateral maritime connections as measured by UNCTAD's bilateral liner shipping connectivity index, and we find that FDIs between two partner countries do not significantly impact their maritime connection. However, we do find that Chinese FDIs in countries concerned by the Belt and Road Initiative (BRI) reinforce bilateral maritime connections between countries, in general, be they BRI countries or not. The Chinese influence is also significant via their maritime presence: maritime connections between two countries are significantly higher when host countries have strong maritime ties to China. A deeper analysis through several interaction effects also shows the Chinese influence is conditional on host countries' attributes. For instance, a maritime connection with China is more beneficial to developing/poorer host countries, who see their connection to origin countries increase more as compared to developed/richer host countries.