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Does China’s Outward Direct Investment Improve the Institutional Quality of the Belt and Road Countries?

Chunyang Pan (), William X. Wei (), Etayankara Muralidharan (), Jia Liao () and Bernadette Andreosso-O’Callaghan ()
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Chunyang Pan: Department of Economics, School of Business, East China University of Science and Technology (ECUST), Institute of Advanced Studies for Social Sciences at ECUST, Shanghai 200237, China
William X. Wei: School of Business, MacEwan University, Edmonton, AB T5J 4S2, Canada
Etayankara Muralidharan: School of Business, MacEwan University, Edmonton, AB T5J 4S2, Canada
Jia Liao: Department of International Economics and Trade, School of Business, Shanghai University of International Business and Economics, Shanghai 201620, China
Bernadette Andreosso-O’Callaghan: School of Business, University of Limerick, V94 T9PX Limerick, Ireland

Sustainability, 2020, vol. 12, issue 1, 1-21

Abstract: This article investigates the effects of China’s outward direct investment (ODI) on the institutional quality of the Belt and Road (B&R) countries. Based on a panel data set of 63 B&R countries during the period 2003 to 2016, we find that China’s ODI improves the institutional quality of B&R countries not only in the short run but also in the long run. Further, although China’s ODI exerts no differential impacts on host country institutional dimensions of “control of corruption,” “government effectiveness,” and “political stability” in countries with different natural resource endowments, it improves their institutional dimensions of “regulatory quality” and “rule of law,” implying that China’s ODI may help the host B&R countries minimize the “resource curse”. As one of the most important strategies for China’s opening-up development in the current era, the B&R initiative serves as means to promote sustainable development of B&R countries. The article therefore contributes to existing scholarship on the institutional effects of China’s ODI and sheds light on the mechanisms that drive sustainable development.

Keywords: outward direct investment; institutional quality; belt and road countries; China (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2020
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