Does the Belt and Road Initiative Promote Bilateral Political Relations?

• Published date: 01 September 2021
• Author: Yue Lu,Wei Gu,Ka Zeng
• Date: 01 September 2021
• DOI: http://doi.org/10.1111/cwe.12387

©2021 Institute of World Economics and Politics, Chinese Academy of Social Sciences

China & World Economy / 57–83, Vol. 29, No. 5, 2021 57

*Yue Lu, Professor, School of International Trade and Economics, University of International Business

and Economics (UIBE), China. Email: lvyue@uibe.edu.cn; Wei Gu, Postgraduate Student, Department

of Economics, The Chinese University of Hong Kong, China. Email: gweiuibe@hotmail.com; Ka Zeng

(corresponding author), Professor, Department of Political Science, University of Arkansas, USA. Email:

kzeng@uark.edu. This research was supported by the National Natural Science Foundation of China (Nos.

72073025 and 71873031) and the Program for Excellent Talents, UIBE (No. 20JQ02).

Does the Belt and Road Initiative Promote

Bilateral Political Relations?

Yue Lu, Wei Gu, Ka Zeng*

Abstract

This paper examines the role of the Belt and Road Initiative (BRI) in enhancing political

relations between China and its partner countries. We postulate that an international

economic cooperation scheme such as the BRI may facilitate commercial exchanges and

increase the participating countries’ economic gains. This should generate incentives

IRUWKHVH FRXQWULHVWR DYRLGSROLWLFDO WHQVLRQVWKDW PD\MHRSDUGL]HPXWXDOO\ EHQH¿FLDO

economic exchanges, and to expand the constellation of domestic coalitions in support

of cordial diplomatic and political relations. We test the effect of the BRI on bilateral

political relations using data on political relations between China and 91 countries

along the BRI route between 2006 and 2018. Treating the promulgation of the BRI in

2013 as a policy shock, our difference-in-difference analysis lends substantial support to

our hypotheses. Further analyses of the underlying causal mechanisms suggest that the

BRI bolsters political relations by strengthening economic ties with partner countries

through trade and investment related to economic cooperation.

Key words: BRI, international economic cooperation, political relations

JEL codes: F10, F15, O17

I. Introduction

The issue of whether and how international economic cooperation enhances political

relations among nation states has received considerable scholarly attention, with a

large number of studies (e.g. Mansfield and Pevehouse, 2000; Russett and Oneal,

2001; Haftel, 2012) concluding that international economic interdependence reduces

the potential for conflict among countries within the same international economic

cooperation. As a comprehensive international economic cooperation scheme, China’s

© 2021 The Authors. China & World Economy published by John Wiley & Sons Australia,

Ltd on behalf of Institute of World Economics and Politics, Chinese Academy of Social Sciences.

This is an open access article under the terms of the Creative Commons Attribution License,

which permits use, distribution and reproduction in any medium, provided the original work is properly cited.

Yue Lu et al. / 57–83, Vol. 29, No. 5, 2021

©2021 Institute of World Economics and Politics, Chinese Academy of Social Sciences

58

Belt and Road Initiative (BRI), formerly known as the One Belt, One Road (OBOR)

initiative, is designed to promote friendly relations with partner countries through

greater connectivity and economic exchanges. The BRI shares considerable similarities

with regional economic cooperation agreements in that both emphasize trade and

investment liberalization but it also goes beyond the latter by emphasizing the creation

of connectivity through policy coordination, infrastructure development, financial

cooperation and integration, and people-to-people exchanges.1 By 30 January 2021,

China had signed 205 BRI cooperation agreements with 171 countries and international

organizations.2 Such developments hint at the possibility that the initiative may play a

positive role in promoting political relations between China and the BRI countries.

([LVWLQJWKHRUHWLFDODSSURDFKHVHJ0DQV¿HOGDQG3HYHKRXVH*DUW]NHHWDO

2001; Gartzke, 2007) suggest that economic interdependence through trade and

investment positively affect inter-country relations. Building on this literature, we

postulate that an international economic cooperation scheme such as the BRI may

facilitate commercial exchanges and increase the gains that member countries may be

able to capture through the initiative. This should generate incentives for participating

FRXQWULHVWR DYRLGSROLWLFDO WHQVLRQVWKDW PD\ MHRSDUGL]HPXWXDOO\ EHQH¿FLDOHFRQRPLF

exchanges. International economic cooperation schemes should also strengthen domestic

support for friendly diplomatic relations, positively affecting bilateral political relations.

Following the above line of reasoning, we test the impact of the BRI on political

relations using data on China’s economic and political relations with 91 BRI countries

between 2006 and 2018. Treating the promulgation of the BRI in 2013 as a policy

shock, we use the difference-in-difference (DID) method to disentangle the effect of the

initiative on China’s political relations with BRI countries. Our empirical results lend

substantial support to our theoretical conjectures, indicating that the BRI generates a

strong positive effect on bilateral political relations.

We explore the mechanisms through which the BRI affects bilateral political

relations and find that the BRI may strengthen economic ties between China and its

partner countries by encouraging activities such as trade and investment related to

economic cooperation (IEC). This, in turn, may facilitate the development of common

interests and the emergence of political coalitions in favor of cooperative diplomatic

relations. Further analyses of the underlying mechanisms corroborate our expectations.

1These priorities were expected to be achieved through joint transportation infrastructure development, joint

HVWDEOLVKPHQWRILQGXVWULDOSDUNV WUDGHDQGLQYHVWPHQWSURPRWLRQ DQG¿QDQFLDOFRRSHUDWLRQVXFK DVVWUDWHJLF

cooperation with the Asian Infrastructure and Investment Bank (AIIB), or joint collaboration in regional

initiatives (Rabena, 2018).

2See http://www.gov.cn/xinwen/2021-01/30/content_5583711.htm for more detail (online; cited February 2021).

© 2021 The Authors. China & World Economy published by John Wiley & Sons Australia,

Ltd on behalf of Institute of World Economics and Politics, Chinese Academy of Social Sciences.

This is an open access article under the terms of the Creative Commons Attribution License,

which permits use, distribution and reproduction in any medium, provided the original work is properly cited.