Investment Efficiency of Chinese Enterprises Under ‘Belt and Road' Initiatives: What Information Do We Get From Studies?

Introduction

The past few years have witnessed a transition of China’s economic development from a stage of rapid growth to the new normal of medium and high-speed growth. When analyzing the problems caused by the “scale expansion”-based developmental pattern, the top priority for the Chinese government is to overcome developmental bottlenecks. For this background, in 2013, President Xi introduced two initiatives in succession to build “the Silk Road Economic Belt” and the “21st Century Maritime Silk Road” (collectively referred to as the belt and road initiative). In March 2015, the National Development and Reform Commission, the Ministry of Foreign Affairs, and the Ministry of Commerce jointly issued the Vision and Actions on Jointly Building Silk Road Economic Belt and 21st Century Maritime Silk Road (hereinafter referred to as the “Vision and Actions“), which puts the belt and road initiative (BRI) as a top-level design into practical implementation. Focusing on the construction of relevant infrastructure, this initiative aims to strengthen the cooperation for production capacities and to align developmental strategies among the countries along the belt and road. According to statistics released by the Ministry of Commerce for 2013-2018, the total direct investment of Chinese enterprises in countries along the belt and road exceeded 90 billion USD in this time-frame, with an annual mean growth rate of 5.2%. Hence, this paper will focus on the investment efficiency of the investment triggered by the initiative.

Microeconomic entities constitute an important component of economic development. The economic output of micro-enterprises is a significant driving force for the development of the national economy (Jensen and Meckling, 1976) and contributes to the realization of macroeconomic policy goals. However, existing studies mainly focused on the macroeconomic conditions of the countries that are affected by the BRI (William, 2016), while rarely probing into their microeconomic entities with a quantitative approach. This paper conducts an empirical study on the paths with which the BRI affects the investment efficiency of Chinese enterprises, and has vital instructive significance for both the government for promoting macroeconomic growth and for micro-enterprises for continuously increasing their values.

The BRI can be considered as a quasi-natural experiment. With regard to China itself, the effects of the BRI vary from province to province. Based on the geographical positions and economic functions of different region¹, key regions that are affected by the BRI can be identified (Chen and Liu, 2018). This offers an opportunity for using the difference in difference (DID) model for this study. Relying on the quasi-natural experimental environment created by the BRI, this paper empirically investigates the effects of this initiative on the investment efficiency of Chinese enterprises, using the DID model, based on data of Chinese listed companies for 2011-2018. The results show that, relative to enterprises distributed in non-key regions, the investment efficiency of enterprises in the key regions is significantly increased by the BRI. On this basis, this paper explores the paths with which the BRI affects the investment efficiency of Chinese enterprises from the perspectives of both environmental uncertainty and tax incentive. As indicated by the results, the mediating effect of environmental uncertainty between the BRI and the investment efficiency of Chinese enterprises assumes a significant “masking effect” (i.e., environmental uncertainty weakens the positive effect of the BRI on investment efficiency), while the mediating effect of tax incentive between them is not obvious.