The Belt and Road Initiative, sister-city partnership and Chinese outward FDI

Abstract

Extant research has explicitly recognized the importance of the compatible environment in the context of globalization. Sister-city partnership has long been developed for the establishment of such a favorable environment to facilitate international investment. Using a panel data set that covers 66 Belt Road countries and 75 non-Belt Road countries from 2006 to 2017, we investigate the impact of sister-city relationship between China and her partner countries as well as its interactive effect with Chinas’ recent global home institution, BRI on the Chinese outward FDI. We find consistent evidence that both sister-city partnership and BRI promote the Chinese outward FDI while these effects are rather complementary than supplementary to each other. Further, we find that the positive impact of BRI seems to be more pronounced in privately owned enterprises (POE) rather than state-owned enterprises (SOE), which suggests that BRI at this stage is more market-oriented and less political-oriented. Our findings suggest that the policymakers should hold more open attitudes towards the establishment of sister-city partnership and towards the Belt Road Initiative to promote more Chinese outward foreign investment so as to deepen the bilateral economic cooperation.