Effects of Business Ties on Chinese Enterprises’ Belt and Road Overseas Investment Risks

This study aims to form a comprehensive methodological approach to the diagnosis of Chinese enterprises’ risk management in foreign investment, taking into account the influence of various factors and project ties within Belt and Road Initiative. The methodology of the study is based on a discrete survival model based on the use of complementary double-log regression. The study confirmed that Chinese enterprises operating in underdeveloped financial markets or enterprises with a greater need for external financing benefit more from project ties. Belt and Road Initiative project ties affect a company’s foreign investment risks and the economic expansion of a country, namely credit financing, which is associated with financial constraints and a large amount of initial capital investment. Testing the formed model allowed determining that in countries with an underdeveloped financial sector and weak institutions, project ties contribute to the decline in efficiency and competitiveness of enterprises in international markets. This allows formulating ways to minimize the risks. The identified determinants revealed the influences on the choice of Chinese enterprises of a recipient country for foreign direct investment in the context of their risk management using both micro- and macro-level characteristics. Chinese companies have strong motives to invest in countries that are well endowed with capital, skilled labor, and natural resources, but no evidence was found in favor of seeking new markets. A positive effect of enhanced project ties between China and a recipient country was also found.