One Belt One Road: Capital Investments, Economic Integration, and Growth of Participating Countries

One Belt One Road: Capital Investments, Economic Integration, and Growth of Participating Countries

John Boamah (Xiamen University, China) and Michael Appiah-Kubi (Xiamen University, China)
DOI: 10.4018/978-1-5225-8980-8.ch002

Abstract

This chapter starts with the need for infrastructure investment in One Belt One Road (OBOR) countries. By employing a simple linear regression analysis, it is evident that massive infrastructure could lead to an improved wellbeing of member countries. The chapter also highlights the current state of infrastructure investment levels of participating countries. The evidence shows that most member countries lack quality infrastructure levels. The concluding part of the chapter explores economic integration among member countries. Through network analysis, it is evident that though member countries are gradually being integrated, such integration is at a slower rate than expected. Massive investment in infrastructure in China and by extension the countries along the Belt and Road would not only provide financial gains to business partners but would as well lead to an improved wellbeing of countries in the initiative. This provides an opportunity for both domestic and foreign businesses to consider massive investment in infrastructure in China, which is at the center of the initiative.
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Economic Growth Of Obor Countries

The study of growth of member countries is important as it will help to understand how member countries have fared since joining the Initiative. Though the Initiative is still at its infant state (about five years old), the findings would suggest the possible effect and suggest strength that demands attention to help in the mutual benefit of participating countries (Huang, 2016).

In classical growth models, the GDP growth of countries is modeled as being dependent on other growth determinants. Not only is it important to understand the growth potentials of member countries, it is equally important to understand the well-being of citizens of member countries. In basic economic sense, one single measure of the well-being of people is GDP per capita. Scaled by the population level, we are able to understand, in terms of per person, how the citizens of nationals compare to each other.

To understand relationship between growth and capital investment, we model GDP per capita as being dependent on two determinants; infrastructure score and Gross Fixed Capital Formation (GFCF). These measures are meant to highlight the possible effect of capital investments on the growth of OBOR countries. An Initiative like OBOR has at its core infrastructure investments (Du and Zhang 2017). One best way to understand the impact of the project and to also highlight the possible impact of the policy is to understand the possible impact of infrastructure on member countries. Table 1 presents average of three key variables, GDP growth levels, GDP per capita and Gross Fixed Capital Formation.

Table 1.
Average GDP growth, per capita and gross fixed capital formation
978-1-5225-8980-8.ch002.g01

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