China’s Belt and Road Initiative has reshaped international economic and political ties among countries and reorganised global value chains. This column reveals that the initiative has triggered strategic and divergent responses among major investor countries, depending on their economic and political relationships with China. The US increased its investment in countries after they signed BRI agreements with China, largely driven by strategic competition, while the UK reduced investment, reflecting concerns over political and supply chain risks linked to China. Japan’s investment in BRI countries appears to be largely unaffected by its strategic stance toward China.
China’s Belt and Road Initiative (BRI) was launched in 2013, first aiming at the development of transport infrastructure between China and the rest of the world, including Asia, Europe, and Africa, and then expanding to energy and digital projects. By 2024, 149 countries had signed Memorandums of Understanding (MoUs) for the BRI with China, and BRI engagement boasted US$71 billion in construction contracts and $51 billion in investments – the highest level since its start. As a result, the BRI has reshaped international economic and political ties among countries and reorganised global value chains.
Some research in the dense empirical literature on the BRI has examined how it has affected trade with China, while others focus on foreign direct investment (FDI), an important part of global value chains. Generally, FDI from China to BRI countries is found to increase, possibly because of improved infrastructure that lowers production and transport costs and strengthened political relationships with China that reduce investment uncertainty.
In addition to FDI from China, the BRI may affect FDI from other countries for several reasons. First, improved infrastructure may attract FDI from any country, not restricted to China. Second, participation in the BRI signals closer political alignment with China because China intends to assert greater international influence through the BRI.
Under these circumstances, Western nations that are not comfortable with China’s expansion in international politics could react to BRI countries in various ways. If Western nations feel that investing in BRI countries which strengthen political ties with China is risky, they could reduce FDI in BRI countries. However, if Western nations consider they need to compete against China for political and economic leadership in BRI countries, they should increase FDI.
Considering the possible differences in the effect on FDI into BRI countries from various Western countries such as the US, Japan, and European countries, in addition to China, there exists a staggered difference-in-differences (DID) estimations to data for global bilateral FDI. We reveal how the BRI has triggered strategic and divergent responses among major investor countries, depending on their economic and political relationships with China. The findings underscore the reality of a world where investment is no longer driven only by economic fundamentals, but also by political and security factors.
First, our empirical results show that despite refusing to join the BRI, the US actually increased its investment in BRI countries after they signed MOUs with China. Strategic competition is a major reason for that investment.
China becoming an economic and technological superpower and strengthening economic and political ties with other countries through the BRI and other measures have added fuel to the US-China rivalry. Through initiatives like the Blue Dot Network and the G7’s Build Back Better World, the US has sought to provide alternatives to the BRI. FDI is part of that toolkit.
In practice, US firms and development finance institutions have targeted the same infrastructure and energy sectors where China is most active. For example, former US President Biden visited Angola in December 2024 and initiated a 1,344 km railway project together with other G7 countries in order to compete with China, which had already invested heavily in Angola’s railways.
This dynamic illustrates a key point: the BRI does not crowd out Western engagement everywhere; sometimes it provokes it.
By contrast, the UK has reduced its FDI in BRI participant countries. This retreat reflects a growing perception of political and supply chain risks linked to China, especially after 2018 when concerns over 5G, technology transfer, and national security intensified. Notably, the UK government’s view of China and the BRI shifted from positive to substantially negative in 2019, formally stating “systemic challenges” from China as the reason for this shift.
The recent literature on supply chains has demonstrated that global supply chains are vulnerable to foreign economic shocks that arise due to geopolitical issues. Private efforts to mitigate these supply chain disruption risks seem to have resulted in a negative effect on FDI from the UK.
Japan’s pattern is more muted. We show that Japanese FDI in BRI countries rose after BRI participation, but the increase is statistically insignificant. The result implies that the positive effect through strategic rivalry with China and the negative effect through minimising supply chains with unfriendly BRI countries cancel each other out.
Moreover, when the effect of host-country fixed effects are controlled for, we find that FDI from Japan was quite stagnant both in the pre- and post-BRI periods. This implies that host-country characteristics that do not clearly appear in data such as the levels of transport infrastructure and institutions with potential for investment led to the increasing (although insignificant) trend in FDI from Japan in the post-BRI period. This analysis confirms that Japan’s FDI to BRI countries is not largely affected by its strategic stance toward China.
Until recently, the BRI had been criticised because it caused debt crises and labour disputes in many of the member countries. However, because US President Trump has imposed high tariffs on most countries, closed down USAID, and shrunk foreign aid, countries in the Global South are currently more willing to strengthen their economic and political links with China. China has responded to this shift quickly and increased the amount of investment in BRI projects to the maximum level in 2024, after a drop during the COVID-19 pandemic period.
It all indicates that the Western nations did not react uniformly to the BRI by increasing FDI to BRI countries. Regardless of this, reducing economic ties with the Global South may lead to increased vulnerability of supply chains for Western nations, because diversified supply chains are found to increase their resilience. In addition, shrinking economic ties may also shrink political ties. Therefore, Western nations may have to change their strategic responses to the resurgence of the BRI and strengthen economic and political ties with the Global South to promote supply chain resilience and national security.
By Yasuyuki Todo, Shuhei Nishitateno and Sean Brown for the CEPR.
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Once a domestic shopping festival, China's Double 11 now straddles two fronts - driving massive sales at home while testing the reach of its cross-border e-commerce network. According to the Xiamen Daily on Monday, the city's cross-border e-commerce supervision center is in its peak export season. Inside the facility, conveyor...
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Specifically, the consumption of gold jewellery in the Chinese market fell...
China mined 271.78 tonnes of gold during the first nine months of 2025, a 1.39 per cent year-on-year increase, according to data from the China Gold Association (CGA).
Gold consumption in China was 682.73 tonnes during the reporting period, which is 7.95 per cent less than a year earlier, the CGA noted.
Specifically, the consumption of gold jewellery in the Chinese market fell...
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The yuan-dollar exchange rate was 7.0836 yuan per dollar on the previous trading day.
Per the order...
The central parity rate of the Chinese yuan against the US dollar weakened by 20 basis points today compared to the previous trading day, reaching 7.0856 yuan per US dollar. This is according to data from the China Foreign Exchange Trade System (CFETS).
The yuan-dollar exchange rate was 7.0836 yuan per dollar on the previous trading day.
Per the order...
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The innovative nature of this vessel lies in using a 200 MW molten salt thorium reactor (TMSR). This is equivalent to the power level of a VVER type...
China is developing a project for a cargo ship with an innovative power plant capable of carrying up to 14 thousand TEU of containers, reports the South China Morning Post.
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Gnosis, the human nutrition and health division of French...
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Gnosis, the human nutrition and health division of French...
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The communique states “They agreed to develop cooperation on Arctic issues, including interaction within the Subcommittee...
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"The restoration processes of the MPP itself were not assessed correctly enough. When we arrived at the site, the restoration...
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"The CIIE is impressive in every respect — in its organization, scale and significance," Lotrič said...
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"The CIIE is impressive in every respect — in its organization, scale and significance," Lotrič said...
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The Paris-headquartered company is also considering expanding exports of its The Chuan...
Pernod Ricard, the French spirits and champagne group, will deepen its footprint in China by capitalizing on growing demand for whisky, vodka, gin and tequila, amid a global shift toward premium and experience-driven consumption, according to a senior executive.
The Paris-headquartered company is also considering expanding exports of its The Chuan...
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The Danish dairy cooperative unveiled Cocio coconut-flavored chocolate...
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The Danish dairy cooperative unveiled Cocio coconut-flavored chocolate...
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They noted that a growing...
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They noted that a growing...
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Speaking as the chief guest at the Sangam Gala 2025 held by the Chinese Embassy in Pakistan in Islamabad earlier this week, Sheikh said China's achievement in...
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Speaking as the chief guest at the Sangam Gala 2025 held by the Chinese Embassy in Pakistan in Islamabad earlier this week, Sheikh said China's achievement in...
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During the forum, Hassan El-Khatib, Egyptian minister of investment and foreign trade, affirmed the country's commitment to expanding bilateral cooperation in investment and...
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During the forum, Hassan El-Khatib, Egyptian minister of investment and foreign trade, affirmed the country's commitment to expanding bilateral cooperation in investment and...
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The festival, which opened on Thursday, drew Chinese and Burkina Faso officials, agricultural experts, and over 100 local farmers to Boulbi, about 20 km southeast of the...
The inaugural China-Burkina Faso Friendship Harvest Festival has kicked off in Boulbi, Kadiogo Region, celebrating a milestone in agricultural cooperation between the two countries.
The festival, which opened on Thursday, drew Chinese and Burkina Faso officials, agricultural experts, and over 100 local farmers to Boulbi, about 20 km southeast of the...
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The US and China on Monday successively announced a one-year suspension of port fees on each other's vessels and a parallel halt to related investigations in the shipping and shipbuilding sectors, marking the latest step in implementing the consensus reached at the recent bilateral economic and trade talks in Kuala...
