Introduction to the Special Issue on the Economics of the Belt and Road Initiative

The Belt and Road Initiative (BRI) has been China's flagship foreign policy since 2013. Perceived as an emblem of China's rising soft power, the BRI has aroused widespread research interest among academics of various disciplines. To facilitate economic studies of the BRI, the Editorial Board of this journal made a Call for Papers a year ago for a symposium on the economics of the BRI. The manuscripts finally published in this Special Issue were selected by an expedited review process from dozens of the works submitted.

According to the Chinese government's official manifesto of the BRI, the initiative “is designed to uphold the global free trade regime and the open world economy in the spirit of open regional cooperation” (National Development and Reform Commission, 2015). The tenet is seeking mutual benefit and a conjunction of interests for cooperating partners. The Initiative is claimed to be “a global public good,” built in line with the purposes and principles of the UN Charter; open for cooperation to all countries, and international/regional organizations; harmonious and inclusive for different civilizations and nations; and abiding by market rules and international norms. It covers vast areas along Eurasian trade routes between the East Asia economic circle at one end and the European economic circle at the other.

Since its inception, the BRI has become an integral part of China's national plan for economic and social development. The 13th Five-year Plan (2016–2020) includes in it a chapter on the BRI, which specifies policies about cooperation mechanisms, economic corridors, and open and inclusive cultural exchanges (State Council, 2016). The 14th Five-year Plan (2021–2025) also has a chapter on the BRI, which describes policies to strengthen the linkage of development strategies and policies, promote interconnectivity and interoperability of infrastructure, deepen pragmatic economic, trade, and investment cooperation, and build a bridge for mutual learning among civilizations (State Council, 2021).

Garlick (2020) also concedes in his book, The Impact of China's Belt and Road Initiative, that “the BRI, despite its material real-world impacts such as investments and infrastructure projects, is wide open to a range of possible understandings. In fact, in a very important sense, the BRI is not one thing but is a matter of perception” (Garlick, 2020, p. 14).

It is nevertheless evident that the BRI is first and foremost an initiative for international economic cooperation launched and led by China. For us economists, the most relevant research topics are, mainly, what the economic purposes of this Initiative are, how the BRI works, and what effects it has on international trade and investment.

The leading article in this Special Issue, “Necessary and Sufficient Conditions for the BRI Success” (Chen and Guo), presents a framework for understanding the BRI economically. The chief author of this article, Yongjun Chen, is a seasoned economics professor who has built a career in researching and interpreting China's socialist market economy and its characteristic functions in regional development, urbanization, and industrial regulation. His book, An Economic Reader of the Belt and Road Initiative (Chen, 2017), is a concise guide for the general public to understand the economic rationale of the BRI. The article he and his coauthor publish here shows the features of China's economic structure to have huge potential of supply that matches the massive demand of most Belt-and-Road countries for infrastructure development. It also reviews the sufficient conditions that public policies can create to turn that potential into reality and ensure a sustainable win–win cooperation for BRI participants.

To understand how the BRI works, it is not difficult to identify the explicit institutions, such as the Silk Road Fund and the Asian Infrastructure Investment Bank (AIIB). The former is a state-owned fund of the Chinese government launched in November 2014 with an initial amount of $40 billion designed to provide investment and financing support to the Belt-and-Road countries for connectivity projects such as infrastructure, resource development, and industrial cooperation (Xinhua News Agency, 2014). The AIIB, headquartered in Beijing with China as its initiator and major stakeholder, is a multilateral development bank focused on financing economic development projects in Asia. Opened in January 2016 with 57 founding members, the AIIB has so far invested $36.43 billion in 190 projects in 33 members (AIIB, 2022).

There are, however, less visible, but important, mechanisms at work. One of the papers in this Special Issue, “Does Chinese Policy Banks' Overseas Lending Favor Belt Road Initiative Countries?” (Chen et al.), explores the role that China's state-owned policy banks have played in financing BRI projects. Using both the country-aggregated data and the deal-level data, the authors show that, compared to loans from other Chinese (commercial) banks, loans from China's policy banks are more likely to be granted to firms in the BRI countries with preferential loan terms. The difference is more pronounced among firms along the continental route and in the infrastructure sectors. Their empirical results also suggest that China's policy banks provide more credit support to companies in countries with weaker economic performance, lower institutional quality, and closer political relations with China.

Another subtle institutional factor in the BRI is the role of organizations of the Communist Party of China (CPC) in the business of Chinese outward foreign direct investment (OFDI). The next paper in this issue, “The Belt and Road Initiative, Political Involvement, and China's OFDI” (Ding et al.), examines the effect of political involvement (measured by the proportion of the CPC organizations' members in the firm's management) on China's OFDI in the Belt-and-Road countries after the inception of the BRI. Using data from Chinese nonfinancial listed companies from 2008 to 2018, the authors discover that the CPC's political involvement has had positive effects on merger-and-acquisition deals for state-owned enterprises (SOEs) and greenfield investment for non-SOEs in the Belt-and-Road Countries since the BRI started. Interestingly, these positive effects are more significant among firms/projects located in areas with worse market institutions.

These characteristics of policy-bank loans and the effects of CPC's political involvement in China's OFDI raise the concern about financial risks for China's investment in the BRI projects. Of the over 1200 infrastructure projects the Chinese government-financed along the Belt and Road from 2000 to 2020, nearly one-tenth have failed or been delayed. The authors of another paper in this Special Issue, “How Free Trade Agreement Affects the Success of China's Belt and Road Infrastructure Projects” (Hu, Jin, and Wang), analyze the data of these projects and find that the infrastructure investment risks can be mitigated by establishing free trade agreements (FTAs) between China and the host countries of the invested projects. In particular, their empirical work suggests that the “deeper” FTAs, which contain investment provisions, have a stronger effect of reducing the failure rate of China's investment in infrastructure projects in the Belt-and-Road countries.

The investment environment of the host country can be improved by a people-to-people bond with China—this is implied by the findings of the next paper in this Issue, “Investigating whether Connecting People Can Promote Subnational Economic Development: Evidence from China–ASEAN Friendship Cities” (Pang, Tang, and Xie). Combining a dataset of China–ASEAN friendship cities and a remotely sensed nighttime light dataset, the authors find empirical evidence that people-to-people bond in the form of friendship-city relationship is a key impetus for economic development in the ASEAN regions where the friendship-city deals with China are in effect. Bilateral trade, Chinese invested projects, and visits by national leaders appear to be the underlying channels of the impacts.

Effects of the BRI on investment and trade are key to assess the Initiative's success. According to the official account, by the end of 2021, China had codeveloped 79 economic and trade cooperation zones in 24 Belt-and-Road countries, with a total investment of $43 billion. In the first 9 years of jointly building the BRI, the accumulated value of trade in goods between China and other Belt-and-Road countries amounted to nearly $11 trillion while mutual investment exceeded $230 billion (Shi, 2022). The last paper in this Special Issue, “Export creation of the Belt and Road Initiative: ‘Give-them-a-fish’ or ‘Teach-them-to-fish’” (Chen, Zhang, and Zhao), provides further statistical evidence of the trade creation effect of the BRI on its participating countries. The authors attest that signing up for BRI deals with China boosted the exports of the BRI partners by over 20%, compared to the Belt-and-Road countries without such a deal. Export creation came not only from China but also originated from other Belt-and-Road countries, and there was no sign of export diversion from non-BRI countries to BRI countries. Their findings also confirm a link between investment and trade creation.

From the above brief introduction, we can see that the papers in this Special Issue have contributed to our understanding of the economic purposes of the BRI, the working mechanisms of the BRI, and the effects of the BRI on international trade and investment. The BRI is an evolving event in the contemporary world economy. There are many more issues the papers of this Special Issue have not yet reached. We hope that the findings of these papers will encourage and inspire more interesting and fruitful studies in this field among our readers.

Ding Lu: Conceptualization; formal analysis; writing – original draft; and writing – review and editing.

The author declares no conflict of interest.

Not applicable.