Research On The Impact Of China’s Direct Investment On The Debt Of Countries Along The "Belt And Road"

In order to promote the further development of economic globalization,Chinese President Xi Jinping proposed “The Belt and Road” initiative in 2013.Nine years later,“the Belt and Road” has gotten remarkable achievements.But some international scholars regard “the Belt and Road” as the “Debt-trap diplomacy”,which means that that China,in the name of “the Belt and Road”,has made extensive direct investment in the participating countries of the initiative,which directly or indirectly leads host countries to drove up debt burdens.The host country eventually fell into the “debt trap” because of the increase of debt ratio.In the face of international doubts,this paper attempts to explore the feature and transmission channels of the impact of Chinese direct investment on the debt ratio of countries along “the Belt and Road” from the perspective of whether China’s direct investment leads to an increase in government debt ratios.This paper selects the annual panel data from 2003 to 2019 and estimates parameters of unbalanced dynamic-panel model using the System Generalized Moments Method(SYSGMM),takes the central government debt ratio of 73 countries participating in “the Belt and Road” initiative as the explained variable,and takes China’s annual non-financial direct investment flow to the host country as the explanatory variable.The natural logarithm of the host country’s gross national product,urbanization rate,population life expectancy and inflation ratio are control variables.Empirically analyzeing the impact of China’s OFDI on the government debt ratio of countries participating in “the Belt and Road” Initiative.The research results show that China’s direct investment has a debt-reducing effect on the host country,and an important reason for the soar of debt ratio of the host country is past debt ratio.China’s direct investment should not be stigmatized as the culprit for the soaring debt ratio of the participating countries.Next,this paper further group the participating countries of “the Belt and Road”according to their debt ratio,GNI,geographic location,and economic openness to explore the heterogeneity of debt-reduction effect of China’s direct investment on the participating countries.The empirical analysis results show that: for the countries along “the Belt and Road”,the debt reduction effect of China’s direct investment is stronger,and the impact of historical debt on the current debt is weaker.For countries with high ratio of debt,debt reduction effect of China’s direct investment is weak,and the impact of historical debt on current debt is strong.Compared with countries of low national income,historical debt of high-income countries has a weak impact on current debt,while the impect of China’s direct investment on current debt is weak.For countries with a high degree of economic openness,debt reduction of China’s direct investment is significant,and the impact of historical debt on current debt is weak.After that,this paper analyzes the mediation effect of China’s direct investment on the government debt ratio of participating countries along “the Belt and Road”.This paper selects four intermediary variables for testing: country government debt,domestic fixed capital formation ratio,the export volume,and infrastructure level.The research results show that:the export volume and country government debt have partial intermediary effects,and the indirect effect are 30.1% and 39.5% of the total effect respectively respectively,domestic fixed capital formation has suppressing effects,and the indirect effect accounts for 27.16% of the direct effect,which is absolute value.The mediating effect of the infrastructure level is not significant,and the Sobel and Bootstrap test also supports the conclusion that the infrastructure level is not the mediating variable of the impact of Chinese direct investment on the debt ratio of the host countries.Finally,relevant policy suggestions are put forward from the two aspects of China and the participating countries along “the Belt and Road”,according to the research conclusions of this paper.The research conclusions of this paper provide theoretical and data support for China to promote “the Belt and Road” initiative internationally and respond to doubts and critics.At the same time,it also provides suggestions for China to avoid increasing the host country’s debt ratio and for countries along “the Belt and Road” to specify economic policies.