Effects of FDI on trade among countries along the Belt and Road: A network perspective

Abstract

From the network perspective, this paper explores the effect of FDI on trade and analyzes the structural effect on different sectors classified by technology levels among the Belt and Road (B&R) countries. Employing social network analysis methods, we depict the evolution of FDI networks and trade networks of B&R countries and find that both two networks are disassortative and small-world networks as well as the density and number of edges increase. Through the results of ERGM, we get three findings about the effect of FDI on trade. (1) FDI has the positive effect on trade among B&R countries from the network perspective; (2) the positive effect of FDI on trade has improved since the Belt and Road Initiative is proposed; (3) FDI promotes the exports of low technological sector, medium technological sector, and high technological sector, but the effect on medium technological sector is stronger than the other two sectors.

KEYWORDS:

• FDI
• trade
• networks
• Exponential Random Graph Model (ERGM)
• Belt and Road Initiative

JEL Classifications:

• F21
• F40
• R11

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

1 There are 66 countries in the B&R Initiative. (1) 2 countries in East Asia: China (including mainland, Hong Kong SAR, and Macao SAR) and Mongolia; (2) 10 ASEAN countries: Singapore, Malaysia, Indonesia, Myanmar, Thailand, Laos, Cambodia, Vietnam, Brunei, and Philippines; (3) 18 countries in West Asia: Iran, Iraq, Turkey, Syria, Jordan, Lebanon, Israel, Palestine, Saudi Arabia, Oman, United Arab Emirates, Yemen, Qatar, Kuwait, Bahrain, Greece, Cyprus, and Sinai Peninsula of Egypt; (4) 8 countries in South Asia: India, Pakistan, Bangladesh, Afghanistan, Sri Lanka, Maldives, Nepal, and Bhutan; (5) 5 countries in Central Asia: Kazakhstan, Uzbekistan, Turkmenistan, Tajikistan, and Kyrgyzstan; (6) 7 CIS countries: Russian Federation, Ukraine, Belarus, Georgia, Azerbaijan, Armenia, and Moldova; (7) 16 countries in central and Eastern European: Poland, Lithuania, Estonia, Latvia, Czech Republic, Slovakia, Hungary, Slovenia, Croatia, Bosnia and Herzegovina, Montenegro, Serbia, Albania, Romania, Bulgaria, and TFYR of Macedonia.

2 The 45 economies are (1) 2 countries in East Asia: China (including mainland, Hong Kong SAR and Macao SAR) and Mongolia; (2) 6 ASEAN countries: Singapore, Malaysia, Indonesia, Myanmar, Thailand and Philippines; (3) 7 countries in West Asia: Turkey, Jordan, Lebanon, Israel, Saudi Arabia, Kuwait, Bahrain; (4) 6 countries in South Asia: India, Pakistan, Bangladesh, Sri Lanka, Nepal and Bhutan; (5) 2 countries in Central Asia: Kazakhstan and Tajikistan; (6) 6 CIS countries: Russian Federation, Ukraine, Belarus, Georgia, Azerbaijan and Armenia; (7) 14 countries in central and Eastern European: Poland, Lithuania, Estonia, Latvia, Hungary, Slovenia, Croatia, Bosnia and Herzegovina, Montenegro, Serbia, Albania, Romania, Bulgaria, and TFYR of Macedonia.

Additional information

Funding

This work was supported by Guangdong Science and Technology Department [grant number 2019A101002064]; Humanities and Social Sciences Research Fund of Ministry of Education of China [grant number 20YJC790189]; The 2020 research project of the 13th Five-Year Plan for Education science of Guangdong Province [grant number 2020GXJK213]; Social Science Planning Project of Guangdong Province [grant number GD19YGL17]; Guangdong Provincial Science and Technology Project [grant number 2019ST008].