Scandinavian Working Papers in Economics

Working Paper Series,
Research Institute of Industrial Economics

No 1439: The Belt and Road Initiative: Economic Causes and Effects

Fredrik Sjöholm ()
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Fredrik Sjöholm: Research Institute of Industrial Economics (IFN), Postal: Research Institute of Industrial Economics, Box 55665, SE-102 15 Stockholm, Sweden

Abstract: Chinese investment abroad has grown significantly in connection with the Belt and Road Initiative. This article tries to answer two questions: first, what considerations gave birth to the BRI? And second, what are the project’s economic effects in terms of capital flows and international trade? It is found that the project is, above all, a way to deal with large surplus capacity in China’s capital-intensive industries, to increase growth in relatively poor regions of the country, and to secure a supply of energy and raw materials. For other countries involved in the project, BRI investments are a means to increase production and international trade. International trade and foreign direct investment have been positively affected, although to a limited extent. Finally, there are concerns that lack of transparency in Chinese lending may lead to increased corruption, and that some countries will face financial difficulties.

Keywords: The Belt and Road; China; Trade; FDI; Investments

JEL-codes: F10; F20; O10; O50

Language: English

26 pages, September 20, 2022

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