The Impact of China’s Outward Foreign Direct Investment on the External Risk Exposure of Industrial Chains in Countries Along the Belt and Road

Liguo Zhang, Jiaoyang Jia and Xiang Cai ()
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Liguo Zhang: School of Management, Guilin University of Electronic Technology, Guilin 541004, China
Jiaoyang Jia: School of Management, Guilin University of Electronic Technology, Guilin 541004, China
Xiang Cai: School of Management, Guilin University of Electronic Technology, Guilin 541004, China

Sustainability, 2025, vol. 17, issue 21, 1-30

Abstract: Against the backdrop of safety becoming a key objective in the restructuring of industrial chains, the impact of China’s outbound foreign direct investment (OFDI) on industrial chain risks warrants further exploration. Based on the Asian Development Bank’s Multi-Regional Input-Output Data (ADB-MRIOD) from 2007 to 2023, this study measures the external risk exposure of industrial chains from both supply-side and demand-side perspectives across 41 Belt and Road Initiative (BRI) economies. Utilizing a two-way fixed effects panel model with lagged variables and instrumental techniques to mitigate endogeneity, we empirically investigate the mechanisms through which China’s OFDI influences the external risk exposure of industrial chains. The findings reveal that (1) China’s OFDI significantly reduces such risk exposure, and (2) effect heterogeneity observed across country groups and sectors—showing stronger mitigation in high-innovation and developing countries, as well as in capital-intensive industries. (3) Mechanism analysis identifies three transmission channels: enhancing the host country’s trade network status, rationalizing its industrial structure, and strengthening Sino-host country industrial linkages. The study provides empirical support for formulating targeted investment policies to enhance supply chain resilience under the BRI framework.

Keywords: foreign direct investment; input-output table; industrial chain; external risk exposure (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2025
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