Impacts of OFDI on Host Country Energy Consumption and Home Country Energy Efficiency Based on a Belt and Road Perspective

Abstract

Under the Belt and Road concepts of mutual benefit and win–win cooperation, China is strengthening its energy cooperation with other countries. We used several econometric models and social network analysis models to study the impacts of China’s outward foreign direct investment (OFDI) on the host and home countries. We first examined China’s OFDI location preference and analysed the effects of OFDI on energy consumption in host countries. Meanwhile, we observed the impact of the reverse spillover effect of OFDI on China’s energy efficiency. The results indicate that (1) the impact of China’s OFDI on energy consumption in host countries has been lower than that on neighbouring countries, and increased significantly after 2014. (2) The space network of energy consumption in Belt and Road countries has a strict hierarchical structure. However, it was disbanded by the Belt and Road policy in 2014. The network centres are situated primarily in Middle Eastern and European countries, and the network’s periphery is mainly in South-East and West Asian countries. (3) The reverse spillover effects of OFDI, FDI, domestic R&D absorptive capacity, human capital, and financial development levels are conducive to improving China’s energy efficiency whereas regional professionalism does the opposite.

The Impact of Technological Innovation on Energy Consumption in OECD Economies: the role of Outward Foreign Direct Investment and International Trade Openness

“…The spillover effect may increase the size of the market of OECD economies, stimulates domestic firms, leading to higher productivities but with lower energy efficiency. This finding confirms the results of many scholars that found negative impact of outward FDI technology spillover effects on energy consumption (Ren et al, 2022, Zhou et al, 2021, Muhammad and Khan, 2019. Narayan and Narayan (2010) paper estimates the coefficient of the short run and the long-run elasticities of income and confirm the presence of EKC hypothesis which validates an inverted U-shape relationship if the coefficient of the short run elasticity is higher than the longrun elasticities.…”

“…Such spillover may be put in three groups, namely, energy-saving technologies, efficiency of production, and an economic structure shift. Reverse technology spillover effect from outward FDI improves domestic technology innovation and enhances energy efficiency through increasing energy-saving technologies and products which reduces energy consumption (Zhou et al, 2021). But on the dark side, some economic scholars view that the reverse technology spillover may stimulate economic growth, increase household consumption, and raises industrial production which give rise to increase in energy demand and increases carbon emission (Bu et al, 2019;Hübler and Keller, 2009).…”

Does the “Belt and Road Initiative” benefit the environment? Insight from analysis of intra-industry trade in environment goods

“…Secondly, during the construction of the B&R, the vast production capacity caused by enterprises’ OFDI will increase the energy demand [ 34 ]. Traditional energy will not be able to meet the dual requirements of energy supply and environmental protection, which will increase the consumption of clean and renewable energy, thereby promoting the energy restructuring of B&R countries [ 35 ].…”

The Nexus Between Air Pollution and Outward Foreign Direct Investment

“…The third channel is the “scale effect,” which implies that the expansion of production has a negative impact on the environment (Hao et al, 2020). OFDI is often considered an effective way to expand production (Razzaq et al, 2021), leading to more fossil energy consumption and air pollutants emissions (Zhou et al, 2021). Thus, we can infer that OFDI worsens air quality.…”