Third-country investment effects of the belt and road initiative: evidence from China’s overseas direct investment

The Belt and Road Initiative (BRI), designed to enhance trade and investment connections between China and B&R countries, paradoxically challenges linkages with numerous non-B&R countries, a phenomenon known as the third-country effect. This article delves into the complex interplay of socio-economic factors, geographic locations, and bilateral relationships that determine whether the BRI crowds out or crowds in investments in non-member countries. The study reveals that while the BRI significantly displaces China's overall investment towards non-B&R members, it exhibits a diverging impact on different regions. Notably, the BRI shows a significant crowding-in effect on China's ODI in Western European countries, while it notably crowds out China's ODI in African nations. The article also explores the spatial distribution of China's ODI, highlighting the increasing dispersion of investments along the BRI route and the varying impacts on different regions. Through a robust empirical analysis, the study provides valuable insights into the third-country investment effects of the BRI, offering a comprehensive understanding of its implications for global investment patterns and economic relations. The findings underscore the need for further exploration of the crowding-out and crowding-in effects to maintain stability and foster mutual benefits for China's ODI towards non-B&R countries.