Rails of the New Silk Road: railway commitment, host-country risk, and Chinese outward FDI along the Belt and Road

The investment response is concentrated in developing host countries and among capital-intensive and non-technology firms, whereas risk moderation extends more broadly. Neither effect appears in countries sharing a land border with China. The results remain robust across alternative staggered-DID estimators, spillover controls, lagged-dependent-variable specifications, PSM-DID, PPML estimation, and placebo tests.

Phase-specific analysis shows that risk moderation begins during construction, while the firm-level scale response emerges mainly after railway lines enter operation.</p> <p>Chinese outward investment often enters host countries that standard risk assessments classify as difficult, and China-built railways frequently precede it. This study uses the staggered commencement of railway projects in Belt and Road host countries to examine whether a railway commitment changes how investors respond to host-country risk.

Country-level and firm-level evidence for 2003-2024 shows that railway commencement raises the scale and frequency of Chinese outward FDI and weakens the deterrent effect of risk. The investment response concentrates in developing host countries and among capital-intensive and non-technology firms, and it is absent in countries sharing a land border with China. For capital-exporting governments, a credible infrastructure commitment can partly substitute for institutional guarantees that risky hosts cannot offer.

For host governments, the investment dividend of infrastructure depends on the sectors involved and on the geopolitical setting.</p>