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To BRI or not to BRI? Geoeconomic competition, trade agreements and foreign direct investment in East Asia and the Pacific
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DOI：10.1108/AEDS-08-2025-0407.png)
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Abstract
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PurposeMotivated by the emergence of the Belt and Road Initiative (BRI) as an international alliance influencing foreign direct investment (FDI) patterns in Asia and also by innovations in estimating techniques for staggered policy adoption studies, this paper examines how BRI participation reshapes the allocation of inward FDI in East Asia and the Pacific (EAP), a region highly exposed to strategic competition and overlapping institutional frameworks.Design/methodology/approachUsing bilateral FDI stock data for 214 source economies and 35 host economies over the period 2009-2023, we analyze changes in investment allocation following BRI adherence within a gravity-based difference-in-differences framework that accounts for staggered adoption.FindingsWe find that BRI participation is associated with higher inward FDI on average, but that this association does not systematically depend on the presence of pre-existing preferential trade agreements (PTAs). Instead, the effects are highly heterogeneous across investor-host relationships: positive responses are concentrated in South-South investment pairs, while North-North relationships show no detectable effects, and North-South responses are positive but less precisely estimated.Research limitations/implicationsThese results suggest that the BRI operates as a distinct institutional modality based on geopolitical signaling and coordination rather than formal legal integration, with uneven implications for FDI allocation across different types of investment relationships.Originality/value1. Conceptualizing the BRI as a distinct institutional modality based on geopolitical signaling and coordination, rather than as a substitute or extension of rules-based trade agreements. 2. Empirically testing whether BRI effects on inward FDI persist once PTAs are explicitly controlled for, rather than assuming complementarity or substitution. 3. Documenting systematic heterogeneity across income-pair types, with effects concentrated in South-South investment relationships within a single, geopolitically salient region (EAP).
Keywords:
Foreign direct investment
Belt and road initiative
Preferential trade agreements
East Asia and the Pacific
Staggered difference-in-differences
F14
F21
F53
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