How Does the Ofdi Promotion Effect of the Belt and Road Affect Domestic Investment? “Crowd In” or “Crowd Out”

The Chinese government is fostering a new development pattern with domestic circulation as the mainstay and domestic and international circulations reinforcing each other. This arouses the need to construct a micro-foundation to coordinate firms' OFDI and domestic investment. Since the Belt and Road initiative is a key impetus for the new pattern and has enhanced firms' OFDI remarkably, we wonder what mechanisms does such OFDI promotion effect of the Belt and Road initiative (BRIPE) operate on domestic investment. It is found that such enhancement effect is in line with the initiative processing. The BRIPE on domestic investment systematically differs among enterprises in different factor-intensive industries. Specifically, it implies a “crowded-in effect” on domestic investment of non-state-owned firms and technology-intensive firms, but a “crowded-out effect” on that of state-owned firms and labor-intensive firms respectively. Mechanism analyses indicate that the BRIPE on corporate domestic investment is mainly achieved through alleviating financing constraints, improving investment efficiency, and increasing market demand. Our study systematically advances the micro-economic effects of the Belt and Road initiative and contains important policy implications for further construction of the Belt and Road and dual circulation