China’s Belt and Road Initiative (BRI) (formerly known as One Belt One Road) is perhaps one of the most debated topics in the international community in recent decades due to its ambitious scope, its potential implications for the world, and the controversies related to it. Originating in 2013 as the Silk Road Economic Belt and the Maritime Silk Road, as conceived by President Xi Jinping, the BRI quickly escalated in scale. It currently encompasses over a hundred countries connected by six “economic corridors” and involves enormous amounts of resources (estimated at $8 trillion). Against the background of China’s rise as an economic and political power, a project of such a scale is bound to divide opinions. These opinions range from those of idealists (the BRI promotes cooperation, harmony, and mutual benefits) to those of realists (the BRI is a bid for global hegemony and a counterbalance to the US strategy of containment) and pessimists (the BRI is self-defeating due to its risks and costs).
Interpretations of the BRI from an economic perspective have tended to portray its underlying rationale as a solution to China’s economic concerns (export for productivity; the need to secure strategic resources) that has limited implications for the regional and global order. In contrast, interpretations from a political–economic perspective have suggested that economic connections and capacity naturally bring about political influence. The beneficiaries of the BRI may acknowledge or even endorse China’s leadership, rhetorically echoing the official aim of the BRI to build a “community of shared destiny”. Yet others have viewed the BRI as an outright political project, focusing on how it is proactively used to promote China’s soft power and ideas and challenge the US-led international order.
As discussed in the next section, despite a surge in empirical studies on the BRI, no consensus on its impact has yet been reached. Few of these studies have adopted a comparative approach and produced generalizable findings. More importantly, those comparative studies that have resulted in some generalizable findings have not appropriately modeled the nature of the relationship between the BRI and different outcomes, as discussed next, leading to potential biases in their findings. In this study, we examine three key research questions. First, does a country’s participation in the BRI depend on its prior connections with China? Although it is obvious that it should (and much of the literature has discussed the BRI from the international relations perspective), empirical research on the BRI has seldom accounted for this factor. Second, what is the BRI’s true impact, over and above that of the trends of development prior to the BRI? Finally, do the patterns of linkages between a country and China change according to its involvement in the BRI?
The key concern for most countries regarding joining the BRI is its impact on them as a host. As autocracies have an interest in supporting similar regimes elsewhere, scholars have debated whether economic engagement with China enhances an autocratic regime’s survival. Such a perspective has often been supported by findings suggesting that the influx of Chinese capital is detrimental to good governance or promotes questionable practices such as bribery and political intervention. The BRI has also been alleged by some to be a “debt-trap,” with its projects being seen as financially unsustainable, causing a host of difficulties in the repayment of debt and enabling the seizure of strategic assets by the Chinese. Several countries (e.g., Sri Lanka) have suspended or scaled down major BRI projects as the underlying economic risks have become apparent. Because it has often focused on large-scale projects in unstable regions, the BRI has also been linked to environmental degradation, forced displacement, and land-grabbing, provoking local socio-political unrest.
Although one branch of the literature argues, conversely, that host countries have substantial agency in controlling Chinese investments to suit their own objectives [15], this argument does not preclude the fact that the BRI may also have adverse political and economic effects overall.
Although the empirical literature has constituted a definitive improvement, virtually all of the studies that we reviewed (case studies and comparative studies) have neglected a critical aspect of the BRI policy: a country’s engagement in the BRI is not randomly assigned but politically determined. Although case studies may have considered changes leading up to the BRI, they have seldom recognized the implications of these changes for their analysis. In the jargon of research methodology, the process is endogenous, and participation in the BRI is highly likely to be “self-selected.” There are two ways in which this phenomenon may occur. The first is reverse causality: it may not be the case that countries participating in the BRI are more predisposed to Chinese influence than other countries due to their participation; rather, it may be that countries that are friendly toward China are more likely to join the BRI. Given the nature of the BRI, each country’s decision regarding whether and in what capacity to join should be considered to be far from random as it would inevitably be influenced by existing ties with China. For example, the top five BRI participants in terms of the proportion of investment received are Russia, Kazakhstan, Thailand, Pakistan, and Indonesia, all of which had close ties with China prior to joining the BRI.
Conversely, other regional powers (Australia, India, and Japan) are reportedly wary of China’s expansionist geo-political intentions. Many BRI routes circumvent areas of traditional American influence irrespective of commercial prospects. Traditional US influence might also condition the level of a country’s participation in the BRI. These a priori factors arguably determine a country’s participation in the BRI, implying that any supposedly posterior effects may in fact be endogenous. Although this logic might seem obvious, studies have frequently neglected the fact that it confounds a straightforward estimation of the BRI’s overall effect.
Second, even after accounting for the changes leading to the inception of the BRI, the relationship between the BRI and its purported outcomes may still be spurious, i.e., they may be affected by a third factor. Consider globalization as an example. Since its economic liberalization in the 1980s and entry into the World Trade Organization in 2001, China has been expanding its economic ties globally. Beijing has encouraged businesses to invest abroad since the early 2000s. Irrespective of the BRI, China has become the world’s manufacturing hub and a key investor in and creditor to many countries. The BRI may thus be a logical next step in consolidating and enhancing these existing advantages.
Viewed in this manner, the trend of globalization may explain both the economic linkages between China and other countries and the inception of the BRI. Furthermore, some scholars have suggested that the BRI’s structure was determined by economic interests that were established before Xi’s rise to power, and the BRI simply agglomerated and scaled up many existing projects. Therefore, even if there has been an increase in, for example, the level of investment in some economies from China in the BRI era, this increase may well be a continuation of the trends of globalization, economic development, and political initiatives that originated decades ago.
The spurious (or reverse) causal relationship is also likely to operate at the country level, due primarily to political factors. For instance, whereas some studies have
argued that diplomatic linkages to China or the US affect regime types, Wong demonstrated that countries in the process of democratization may strengthen their relationship with the US whereas countries that are becoming more autocratic may do so with China, thus reversing the assumed causal flow. This logic can be extended to the BRI, as regimes that are autocratizing (or have a populist leader seeking to undermine democracy) may be more likely to participate in the BRI (e.g., to attract investments and increase their legitimacy). Similarly, given the resources involved in the BRI, it may present an opportunity for corruption in many developing economies participating in the initiative. Shah highlighted that many countries involved in
the BRI have weak institutional frameworks, hinting at the possibility that corrupt governments may be more enthusiastic about jumping on the BRI bandwagon to exploit the potential for the embezzlement of its resources. In sum, rather than it being that the BRI facilitates autocratization or corruption, it may be that countries prone to such developments are associated with participation in the BRI.
The coverage of the BRI is a point of contention. Despite fledgling discourses on the issue, the scope of the BRI, both geographically and in terms of its constituent activities, has never been specified and has perhaps deliberately been kept vague to accommodate diverse interests [36]. For example, the countries included in the “corridors” can only be estimated due to the lack of available details,even in cases in which the corridors are drawn, they do not correlate significantly with project activity. Furthermore, with no clear criteria as to what qualifies as a BRI project, the abel has been flexibly applied to a range of initiatives constituting an “endless list of
unrelated activities”. The classification of projects as belonging to the BRI or not, however, is crucial in this research to estimate the impact of the BRI.
n our main analysis below, we divide countries into three groups.
First, the “formal participants” are countries that signed a formal agreement under
the BRI framework (regardless of the nature of the document). This definition is
quite broad as it includes all of the 131 countries that formally agreed to join the
initiative (the statistical analysis includes 116 countries due to data availability).
They are, nonetheless, likely to constitute the group that is most likely to exhibit an
effect, because these countries at least signaled an intention to be involved. Second,
21 countries from which enterprises and authorities signed cooperative agreements
on BRI projects during the summits are grouped as “informal participants.” Finally,
the remaining countries that had no involvement in the BRI form the group of “non-
participants.”
Although initially it was largely unclear exactly what it would mean for a country
to be a BRI partner, the general view was that Chinese investments would follow
[45] and that there would be more extensive economic cooperation across various
domains such as trade and infrastructure. To comprehensively assess such linkages,
we examine both passive and active economic indicators. Passive linkages include
the flow of goods between China and the target economy. While the BRI can be
viewed as an economic initiative to expand the markets for China’s products, the
initiative also enhances its potential to secure the resources it desires. Figures of
imports from China (Imp-CN) and exports to China (Exp-CN) for each economy (in
million USD) are taken from the International Monetary Fund Direction of Trade
Statistics.6 It can be argued that passive linkages are more susceptible to factors not
in China’s control, such as the domestic demand in and competitiveness of products
from other economies.
Within the context of the BRI, we must also consider economic indicators that
China can control and manipulate, i.e., the active linkages of outward investment
and aid to other economies. Chinese investments in other economies can be captured using the annual turnover of all projects (in million USD) implemented by Chinese companies
In this study, we focus on corruption and the type of regime. The Varieties of Democracy (V-Dem) project dataset was used to obtain data on corruption and the type of regime. The V-Dem dataset is an encompassing cross-country dataset on political and regime characteristics over time constructed by aggregating inputs from a vast pool of country experts. In the dataset, corruption is indicated by the public sector corruption index, which captures the extent to which “public sector employees grant favors in exchange for bribes, kickbacks, or other material inducements” as well as the frequency of embezzlement of public resources. The level of democracy is indicated by the V-Dem polyarchy index, which is calculated using a similar methodology. For both indices, a higher value represents a better government system (i.e., more democratic or less corrupt).
To test the arguments discussed above, we first conduct a descriptive analysis of the trends of the main economic and political correlates of the BRI. In the context of BRI participation, it may be argued that the trends prior to the commencement of the BRI might have already been different by the 2010s, making a narrow focus on post-BRI (post-2013) changes problematic. To illustrate this point, we plot the outcomes for all of the countries grouped by their participation in the BRI. The quadratic plots are fitted to allow for an inflexion point (where they changed from concave to convex, or vice versa). If the effect of the BRI is significant, there should be an observable upward shift following the announcement of the BRI exclusively for the participant groups. The effect would be questionable if (1) there was no upward shift in their levels in the BRI era, or (2) such a change also occurred for non-participants. This analysis covers the period from 1999 to 2017, capturing the full impact of China’s admission to the World Trade Organization in 2001.
The second observation regarding linkages between other economies and China, which builds on the first, is that the trends prior to the BRI were largely correlated with the countries’ eventual level of BRI participation. The passive linkages (import and export) with the informal participants of the BRI barely increased over the past two decades, whereas the formal participants and non-participants had established stronger trading linkages with China by 2010. In terms of the active linkages, the non-participants lagged behind the other two groups in general; this difference was clearly significant for investments but only marginally significant for aid. Nonetheless, the cross-group differences were already identifiable by 2010. Based on the plots for all four kinds of linkages, we tentatively conclude that economic linkages and BRI participation are endogenous, i.e., the direction of causality is not clear.
Furthermore, assuming that China has greater control over the active indicators (i.e., the decision of which countries to invest in or send aid to), the plots clearly show that China has traditionally been more active in building influence over countries that are now formal participants in the BRI; non-participants received the least amount of investment and aid throughout the period. To the extent that China has some influence over these linkages, it can be argued that they have been used as incentives to further China’s economic influence in this group of countries, which in turn has brought them on board the BRI. Overall, although it is true that formal participants received the most Chinese investment and aid, it is not because of the BRI; rather, it might be because of the linkages in the past two decades that prompted them to become formal BRI partners.
Our analysis of active economic linkages shows that China expanded its levels of investment in the post-BRI era, and that these investments were the highest in the economies of the formal participants. To the extent that investment is a key aspect of the activities of the BRI for participating economies, this finding suggests that China’s current focus (after 2013) is on those economies that have joined the initiative. Whereas this finding might illustrate the economic utility of the BRI framework for transferring Chinese capital to participating countries, we must bear in mind that this group was leading in the receipt of investment from China well before the BRI (as suggested by the descriptive analysis). Thus, either these countries have traditionally been aligned with China, which simultaneously explains their receipt of investments and inclusion in the BRI, or previous Chinese investments have been successful in bringing them on board. This does not mean that the BRI is ineffective or even symbolic, but indicates that the BRI is more an end than a means to China. The BRI is largely a reflection of China’s extant diplomatic links (with countries that have been welcoming Chinese investments both before and after the initiative) rather than a strategy that can transform the geopolitical landscape, as it has not opened up new markets for Chinese investments (given its insignificant effect on informal participants and non-participants).
The positive association between investment and GDP suggests that either Chinese investment in countries increased with the size of their economies or that their economies grew due to greater investment inflow, or a combination of both. As a thorough discussion on this issue is beyond the scope of this article, it suffices to say that the BRI does not particularly focus on underdeveloped economies, as some of the official rhetoric suggests (otherwise, the association between GDP and investment would have been negative). The role of oil in Chinese investment is also noteworthy, as the coefficient of oil rent is negative for the participant group. To an extent, this finding reinforces our argument regarding the limited geopolitical significance of the BRI, which has been purported by some as an effort to secure strategic resources for China. Because oil-rich countries are more resourceful, they rely less on Chinese investments (even if they become BRI members). The finding reflects the fact that the BRI has been less successful in entering countries that are oil-rich than in those without such resources. The results for the relationship between BRI participation and development aid, the other active linkage examined in the study, are similar. We do not find any evi-dence that the BRI has had any concrete impact on the amount of aid that China sends to recipients, regardless of the group they belong to. China has gradually
een increasing its aid to countries that belong to the group of formal participants. However, this trend started well before the BRI, again reflecting the nature of the BRI as a label for countries with whom China has had existing links.
Next, the results on the impact of the BRI on the passive indicators that capture trade depend on whether we account for trends prior to the BRI. This finding raises a crucial question regarding the research design that should be adopted for such problems: should we de-trend data when assessing the impact of the BRI? We argue that it is more appropriate to do so than not. China’s economy has become increasingly integrated with those of countries worldwide over the last two decades, and a continuous upward trend in trade between China and other countries is obvious in our figures. If this trend is not accounted for, any observed effect of the BRI would simply mean that the levels of the economic linkages have on average been higher since 2013 than before, which is not surprising given the growth in China’s economy and deepening globalization. Any economic impact attributed to the BRI must constitute a separately identifiable effect above and beyond those of the ongoing economic trends prior to 2013. As such, we conclude that the BRI fails to demonstrate such a distinct impact on economies that have linkages with China.
The comparative case study illustrates the political and economic nuances of participation in the BRI: the Hungarian case demonstrates the political and economic nature of the BRI, whereas the Italian case demonstrates how the country’s reception of the BRI has largely been an economic decision by its government. Taken together, both case studies illustrate (a) how pre-BRI economic linkages have determined the level of engagement with the BRI and (b) the extent to which the overall economic effects of the BRI have been limited. These findings reinforce both the main arguments proposed in this study and the patterns identified in the quantitative findings.
By examining four types of economic linkages between China and other economies, supplemented by case studies on Italy and Hungary, this study provides an objective assessment of the political and economic impact of the BRI. The BRI has been subject to much controversy and discussion, both inside and outside of academia. However, there has been little empirical research on its real impact, limiting our ability to systematically understand the role played by the BRI in China’s rise. Most studies on the topic have been case studies on the development and impact of individual projects in a country or region. Empirical studies on the topic have seldom accounted for the fact that the BRI, economic development, and diplomatic relations are all endogenous. This study provides a reassessment of the impact of the BRI while accounting for the fact that the BRI might in itself be a reflection of the preexisting (and ongoing) economic and political connections between China and the world.
Therefore, although this study did not aim to resolve the issue of endogeneity (which is challenging to do in this context), it accounts for China’s existing economic linkages prior to the announcement of the BRI, which had been growing for at least two decades, to observe the true impact of the BRI. In addition, this study classifies countries into three groups according to their level of participation in the BRI. This classification not only enables us to avoid making the unrealistic assumption that the BRI’s impact is uniform across all countries, but also provides us with important insights into China’s activities under the BRI Project.
Several findings emerge from our preliminary assessment and descriptive analysis of select political and economic indicators. First, the encompassing nature of the BRI, with more than 116 formal members (as analyzed here), almost guarantees that it will not be an “autocracy club” (as some perceive the Shanghai Cooperation Organisation to be). Much to the contrary, we find that the democracy levels of the formal participants were increasing prior to the BRI and show no signs of decreas-ing in the BRI period. The findings are similar for corruption levels: although the BRI was alleged by some as being conducive to corruption, this does not appear to be the case across all participants. This finding does not imply that the BRI and its projects are free from corruption, or that the projects somehow improve the situation regarding corruption in the recipient economies. It may be that the effect of the BRI on corruption is not consistent among all of the formal participants and is therefore not statistically significant. Conversely, it is also the case that people’s scrutiny of such foreign projects provides an important check on government activities, as evidenced by experiences in several high-profile BRI projects in Southeast Asia.
Second, the three groups of countries (categorized by their subsequent level participation in the BRI) formed coherent and distinct patterns of economic linkages with China not just after but even before the BRI commenced. For some groups, a surge in the intensity of economic linkages could be seen in the early 2000s, well before the BRI period. Both observations support the argument that the development of the BRI has been determined by China’s ongoing linkages with other economies, and it is therefore inappropriate to adopt a straightforward estimation of the BRI’s effect that does not consider ongoing linkages.
The follow-up statistical analysis further reinforces the finding that the impact of the BRI is largely limited to investments flowing to formal participants, especially after pre-existing trends are factored into consideration. Taken together, it can be argued that the BRI does not in itself have a significant impact but that it is more appropriate to view it as a reflection of China’s diplomatic relations with other countries. That is, a country’s traditional standing with China explains its level of participation in the BRI. The findings on the active linkages, over which China has greater control, also show that it is keener on cultivating ties with countries outside the scope of the BRI.
Third, this study distinguishes non-participants from “informal” participants, i.e., countries with unofficial involvement with the BRI, typically represented by civil and commercial delegations at the BRI summits. Although this distinction does not affect the results substantively, it is important for future studies to make a similar distinction between these groups for two main reasons. First, the informal group consists of major western economies including the US, UK, France, and Germany, as well as those traditionally aligned with the US such as Japan.
Despite their informal involvement in the BRI, the statistical results show that this group’s imports from China decreased significantly in the BRI period (after taking away the upward trend over time); the descriptive analyses show that their increase in trade with China has been modest compared with that of the formal participants and non-participants. Therefore, from a theoretical standpoint, it would be interesting to understand the stance of this group toward the BRI, a China-oriented effort with the potential to re-shape the dominant world order, especially against the backdrop of the ongoing US–China trade conflicts. Second, as these countries’ informal cooperative frameworks under the BRI usually focus on specific areas, many of which are not related to economic linkages, it is crucial for research on the non-economic aspects of the BRI to account for these potential areas as well.
Finally, it must be reiterated that this study does not dismiss the scope and reach of the BRI or its potential implications. As highlighted by the vast literature on the topic, the economic and political resources invested into the BRI by China are anything but negligible. The projects that are part of the initiative also have significant economic, social, and political implications for the host economy. The study merely highlights the importance of a more careful investigation into the BRI’s real impact that considers pre-BRI trends alongside China’s involvement with those countries currently outside of the BRI’s scope. Although the study mainly focuses on economic linkages, as they are the most notable correlates of the BRI, future studies should apply the same caution when examining the political impact of the initiative, such as in the issue of whether China has become more influential in other countries because of the BRI. Again, a country’s involvement in the BRI could be attributed to the same reasons for its diplomatic or economic inclination toward China in the first place.
Taken from Mathew Wong and James Downes for the Journal of Chinese Political Science, April 2024 issue.
