The Impact of Digital Economy Development in Belt and Road Countries on China’s Outward Foreign Direct Investment

Abstract

This paper selects 43 countries along the Belt and Road from 2003 to 2022 as the research sample, incorporates the level of digital economy development into an investment gravity model, and empirically examines its impact on China’s outward foreign direct investment (OFDI). The results show that, first, the level of digital economy development in host countries significantly promotes the growth of China’s OFDI, indicating that the digital economy has become an important locational factor affecting the cross-border flow of Chinese capital. Second, from the perspective of sub-dimensions, digital infrastructure development, digital economy competitiveness, and the digital innovation environment all have positive effects on China’s OFDI, among which digital infrastructure plays the most prominent role. Third, the heterogeneity analysis indicates that the promoting effect of the digital economy on China’s OFDI varies significantly across regions, being more pronounced in West Asia and Central and Eastern Europe, while remaining relatively limited in Central Asia and Mongolia as well as ASEAN countries. Fourth, the mechanism analysis shows that digital economy development can significantly improve host countries’ human capital levels and enhance cross-border trade facilitation, thereby providing possible transmission channels for the growth of China’s OFDI. Therefore, China should strengthen cooperation with Belt and Road countries in digital infrastructure construction to unleash the potential of digital economy development; accelerate the internationalization of enterprises and provide high-quality digital technology products to host countries; adopt differentiated investment strategies and establish a digital risk assessment framework for host countries; and seize policy opportunities to cultivate talent with high levels of digital literacy.