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1971In recent years, the poverty reduction process of countries along the “Belt and Road” has been seriously hampered by factors such as the slowdown of the world economy, the intensification of the polarization between rich and poor, the rise of trade protectionism, and the impact of the COVID-19 epidemic. To get rid of poverty and to achieve the poverty reduction goal of the 2030 Agenda are key issues that need to be addressed urgently in countries along the “Belt and Road”. The lack of capital is the biggest obstacle for developing countries to get out of the poverty trap, while attracting foreign investment can make up for the lack of domestic capital and effectively encourage capital formation and economic development. Since the implementation of the “Belt and Road” initiative (BRI), China’s outward foreign direct investment (OFDI) in countries along the “Belt and Road” has revealed a general trend of dramatic increase, and China’s investment cooperation with countries along the “Belt and Road” has been deepening. Will China’s increasing OFDI help to alleviate poverty in countries along the “Belt and Road”? What is its mechanism? Analyzing the above issues is of great practical significance to further strengthen the investment cooperation between China and countries along the “Belt and Road”, and promote countries along the “Belt and Road” to achieve the poverty reduction goal of the 2030 Agenda.
In fact, the research on the relationship between foreign direct investment (FDI) and poverty reduction in host countries is not uncommon at home and abroad. However, there is still a lack of empirical research on the relationship between China’s OFDI and poverty reduction in countries along the “Belt and Road” from a global perspective. Meanwhile, it also lacks discussions on the influence mechanism of the poverty reduction effect of China’s OFDI. Therefore, this paper focuses on the effect of China’s OFDI on poverty reduction in countries along the “Belt and Road”. By using the panel data of 47 countries along the “Belt and Road” from 2003 to 2019, and using the fixed effect model, this paper systematically tests the effect and mechanism of China’s OFDI on poverty reduction in countries along the “Belt and Road”. The results show that China’s OFDI has significantly reduced poverty headcount ratio, poverty gap and squared poverty gap in countries along the “Belt and Road”. After replacing variables, changing research samples, and using China’s wages as the instrument variable to deal with the problem of endogeneity in regressions, the conclusion is further confirmed. The heterogeneity test finds that the poverty reduction effect of China’s OFDI is more obvious for China’s neighboring countries, middle-income countries, and countries with a high degree of mutual trust with China. Further analysis indicates that China’s OFDI has an effect on the poverty reduction of countries along the “Belt and Road” through the employment effect and the technology spillover effect.
The main contributions are as follows: First, instead of looking at the poverty reduction effect of China’s OFDI in some countries along the “Belt and Road”, this paper theoretically analyzes and empirically tests the poverty reduction effect of China’s OFDI in countries along the “Belt and Road” from a global perspective. The perspective not only enriches the research on the poverty reduction effect of FDI, but also highlights China’s contribution to build “a community with a shared future for mankind”. Second, combined with the reality in countries along the “Belt and Road” and the characteristics of China’s OFDI, this paper analyzes the influence mechanism of the poverty reduction effect of China’s OFDI in countries along the “Belt and Road”, which is different from the existing literature. Considering the content, this paper provides empirical evidence for the high-quality development of BRI and global poverty reduction. Third, compared with the existing literature, this paper uses poverty headcount ratio, poverty gap and squared poverty gap to measure income poverty, which is more clearly and accurately to analyze the poverty reduction effect of China’s OFDI in countries along the “Belt and Road”.
