The Belt and Road Initiative and Foreign Capital Transformation in OECD Economies: Evidence from a Difference-in-Differences Analysis

This study examines whether participation in China’s Belt and Road Initiative (BRI) affects domestic capital formation in OECD economies. Using a balanced panel of 38 OECD countries from 2000 to 2024, we estimate a difference-in-differences model with country and year fixed effects. Formal BRI cooperation agreements define treatment status, while robustness is assessed through entropy balancing, lagged specifications, winsorization, placebo tests, and parallel trend diagnostics. The results show that BRI participation is associated with a statistically significant decline in domestic gross fixed capital formation, consistent with a capital reallocation mechanism in which investment shifts toward overseas projects rather than expanding total investment. The effect is stronger in countries with higher governance effectiveness, income levels, and employment rates. By focusing on capital-exporting advanced economies rather than BRI recipients, the study contributes new evidence on how large-scale outward investment strategies can reshape domestic investment dynamics and alter the spatial allocation of capital within advanced economies.