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Yves right here. This attention-grabbing and helpful examine checked out how China’s main strategic rivals, the US, Japan, and the UK, responded to China Belt and Highway investments. Apparently, the US elevated investments in Belt and Highway participant international locations, presumably for defensive strategic causes however doubtlessly additionally on account of improved revenue alternatives.
By Yasuyuki Todo, Professor within the School of Political Science and Economics Waseda College, Shuhei Nishitateno, Professor Kwansei Gakuin College; Analysis Affiliate Analysis Institute of Economic system, Commerce and Trade (RIETI) and Sean Brown. Initially printed at VoxEU
China’s Belt and Highway Initiative has reshaped worldwide financial and political ties amongst international locations and reorganised world worth chains. This column reveals that the initiative has triggered strategic and divergent responses amongst main investor international locations, relying on their financial and political relationships with China. The US elevated its funding in international locations after they signed BRI agreements with China, largely pushed by strategic competitors, whereas the UK diminished funding, reflecting considerations over political and provide chain dangers linked to China. Japan’s funding in BRI international locations seems to be largely unaffected by its strategic stance towards China.
China’s Belt and Highway Initiative (BRI) was launched in 2013, first aiming on the growth of transport infrastructure between China and the remainder of the world, together with Asia, Europe, and Africa, after which increasing to vitality and digital tasks. By 2024, 149 international locations had signed Memorandums of Understanding (MoUs) for the BRI with China, and BRI engagement boasted US$71 billion in building contracts and $51 billion in investments – the best stage since its begin (Nedopil 2025). In consequence, the BRI has reshaped worldwide financial and political ties amongst international locations and reorganised world worth chains.
Some analysis within the dense empirical literature on the BRI has examined the way it has affected commerce with China, whereas others deal with overseas direct funding (FDI), an essential a part of world worth chains. Usually, FDI from China to BRI international locations is discovered to extend, probably due to improved infrastructure that lowers manufacturing and transport prices and strengthened political relationships with China that cut back funding uncertainty (Nugent and Lu 2021, Yu et al. 2019, amongst many others).
Along with FDI from China, the BRI could have an effect on FDI from different international locations for a number of causes. First, improved infrastructure could appeal to FDI from any nation, not restricted to China. Second, participation within the BRI indicators nearer political alignment with China as a result of China intends to claim larger worldwide affect by means of the BRI (Huang 2016).
Underneath these circumstances, Western nations that aren’t comfy with China’s growth in worldwide politics may react to BRI international locations in varied methods. If Western nations really feel that investing in BRI international locations which strengthen political ties with China is dangerous, they may cut back FDI in BRI international locations. Nevertheless, if Western nations think about they should compete in opposition to China for political and financial management in BRI international locations, they need to enhance FDI.
Our examine (Todo et al. 2025) examines the doable variations within the impact on FDI into BRI international locations from varied Western international locations such because the US, Japan, and European international locations, along with China, adopting the staggered difference-in-differences (DID) estimations to knowledge for world bilateral FDI. We reveal how the BRI has triggered strategic and divergent responses amongst main investor international locations, relying on their financial and political relationships with China. The findings underscore the fact of a world the place funding is not pushed solely by financial fundamentals, but in addition by political and safety components.
Determine 1 FDI from main Western traders to BRI international locations
a) United States
b) United Kingdom
c) Japan
Observe: The horizontal axis exhibits years since one 12 months earlier than the signing an MOU between China and the BRI nation.
The US: Competing In opposition to China By way of FDI in BRI International locations
First, our empirical outcomes present that regardless of refusing to affix the BRI, the US truly elevated its funding in BRI international locations after they signed MOUs with China, as proven in Panel (A) of Determine 1. Our examine suggests strategic competitors is a significant motive for that funding.
China changing into an financial and technological superpower and strengthening financial and political ties with different international locations by means of the BRI and different measures have added gas to the US-China rivalry (Li 2021). By way of initiatives just like the Blue Dot Community and the G7’s Construct Again Higher World, the US has sought to offer alternate options to the BRI (Savoy and McKeown 2022). FDI is a part of that toolkit.
In apply, US corporations and growth finance establishments have focused the identical infrastructure and vitality sectors the place China is most lively. For instance, former US President Biden visited Angola in December 2024 and initiated a 1,344 km railway venture along with different G7 international locations to be able to compete with China, which had already invested closely in Angola’s railways (BBC 2024).
This dynamic illustrates a key level: the BRI doesn’t crowd out Western engagement in all places; generally it provokes it.
The UK: Avoiding Dangers of Provide Chain Hyperlinks with BRI International locations
In contrast, the UK has diminished its FDI in BRI participant international locations (Panel (B) of Determine 1). This retreat displays a rising notion of political and provide chain dangers linked to China, particularly after 2018 when considerations over 5G, know-how switch, and nationwide safety intensified. Notably, the UK authorities’s view of China and the BRI shifted from optimistic to considerably detrimental in 2019, formally stating “systemic challenges” from China as the rationale for this shift (Ashbee 2024).
The current literature on provide chains has demonstrated that world provide chains are weak to overseas financial shocks that come up on account of geopolitical points (Alfaro and Chor 2023). Non-public efforts to mitigate these provide chain disruption dangers appear to have resulted in a detrimental impact on FDI from the UK.
Japan: Not Strategic to Take care of the BRI
Japan’s sample is extra muted. We present that Japanese FDI in BRI international locations rose after BRI participation, however the enhance is statistically insignificant (Panel (C) of Determine 1). The end result implies that the optimistic impact by means of strategic rivalry with China and the detrimental impact by means of minimising provide chains with unfriendly BRI international locations cancel one another out.
Furthermore, when the impact of host-country fastened results are managed for, we discover that FDI from Japan was fairly stagnant each within the pre- and post-BRI durations. This means that host-country traits that don’t clearly seem in knowledge corresponding to the degrees of transport infrastructure and establishments with potential for funding led to the rising (though insignificant) pattern in FDI from Japan within the post-BRI interval. This evaluation confirms that Japan’s FDI to BRI international locations is just not largely affected by its strategic stance towards China.
Autocracy and Funding
We additional analysed how the extent of democracy of BRI international locations impacts FDI to those international locations, discovering that autocratic BRI members attracted extra FDI from each China and the US than democratic members. For China, that is in line with its desire for regime-compatible companions, the place infrastructure offers face fewer transparency constraints (Huang 2016). For the US, these findings are consistent with our interpretation that the US invests in BRI international locations to strategically compete with China. As a result of autocratic BRI international locations usually tend to strengthen their financial and political ties with China than democratic BRI international locations, the US is healthier motivated to put money into autocratic international locations.
What Ought to the West Do?
Till just lately, the BRI had been criticised as a result of it prompted debt crises and labour disputes in lots of the member international locations. Nevertheless, as a result of US President Trump has imposed excessive tariffs on most international locations, closed down USAID, and shrunk overseas assist, international locations within the World South are presently extra keen to strengthen their financial and political hyperlinks with China. China has responded to this shift rapidly and elevated the quantity of funding in BRI tasks to the utmost stage in 2024, after a drop in the course of the COVID-19 pandemic interval (Nedopil 2025).
Our outcomes point out that the Western nations didn’t react uniformly to the BRI by rising FDI to BRI international locations. No matter this, lowering financial ties with the World South could result in elevated vulnerability of provide chains for Western nations, as a result of diversified provide chains are discovered to extend their resilience (Ando and Hayakawa 2021, Kashiwagi et al. 2021). As well as, shrinking financial ties can also shrink political ties. Due to this fact, Western nations could have to vary their strategic responses to the resurgence of the BRI and strengthen financial and political ties with the World South to advertise provide chain resilience and nationwide safety.
See unique put up for references
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