Political risk impact on China’s OFDI along the belt and road initiative

Qin Yang, Xiuguo Gong, Tao Chen and Tian Xiao

Finance Research Letters, 2025, vol. 71, issue C

Abstract: Geopolitical tensions increasingly affect China’s outward foreign direct investment (OFDI); however, conventional risk models do not adequately capture these complexities. This study introduces a new quantitative index for assessing the political risks impacting Chinese OFDI along the Belt and Road Initiative, considering both host country systems and bilateral relations. Our analysis reveals an inverse relationship between the host country’s political risk and China’s OFDI, with a tendency towards developing nations. Coastal countries are more sensitive to political risks than landlocked ones. Strong US ties in host countries discourage Chinese investment, whereas market size, resources, and innovation capacity moderate the risk effects. These results provide critical insights for policymakers and business leaders to guide strategic investments and diplomatic strategies in politically volatile regions.

Keywords: Political risk; China’s OFDI; Belt and road (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:71:y:2025:i:c:s1544612324014363

DOI: 10.1016/j.frl.2024.106407

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