Financial cooperation and industrial structure transformation in belt and road countries: mechanisms and regional heterogeneity

The Belt and Road Initiative (BRI) has significantly shaped the landscape of international financial cooperation. This study aims to examine how BRI-related financial cooperation influences industrial structure transformation and coordinated upgrading, by: (i) constructing a composite, multidimensional financial cooperation index; (ii) identifying nonlinear effects conditional on the level of financial development; (iii) testing mediating transmission mechanisms through international trade, capital flow, and technological innovation; and (iv) assessing heterogeneity across ASEAN vs non-ASEAN economies and across pre- and post-2013 (BRI initiation) periods. This study analyzes panel data from 47 Belt and Road countries, including 10 ASEAN and 37 non-ASEAN members, covering the period 2010–2020. A dynamic panel model is estimated using two-step System GMM to address endogeneity, complemented by panel threshold regression to capture nonlinear effects and bootstrapped mediation analysis to evaluate indirect channels. The findings indicate that financial cooperation significantly promotes the coordinated upgrading of industrial structures, with a more substantial effect on upgrading than rationalization. The impact is heterogeneous, with financial cooperation playing with financial cooperation playing a more significant role in non-ASEAN countries than in ASEAN countries. Post-2013, after the initiation of the BRI, the positive effects of financial cooperation intensified. Additionally, the level of financial development in Belt and Road countries serves as a threshold, influencing the degree to which financial cooperation impacts industrial upgrading. Financial cooperation also indirectly drives industrial transformation through trade, capital flow, and technological innovation channels. These results highlight that strengthening financial cooperation—especially where financial development is lower—can catalyze industrial transformation, while policy coordination and risk governance are necessary to maximize upgrading benefits. The study’s novelty lies in combining a multidimensional financial cooperation index with threshold-based nonlinearity, mediation mechanisms, and explicit time- and region-heterogeneity tests within a unified BRI panel setting.