Investment Risk, Transmission Channels, and Chinese Outward FDI: Macro and Micro Evidence from Belt and Road Partner Countries

Whether Chinese OFDI favors hig-risk host countries has been debated for nearly two decades. This paper reopens the question with a more comprehensive measure of investment risk. We construct an entropy-weighted composite index spanning political violence, business environment, macroeconomic conditions, sociocultural friction, and institutional-adaptation friction, incorporating GDELT news tone surrounding host–China interactions. Using data on 137 BRI partner countries and 1260 listed Chinese firms over 2003–2024, we estimate two-way fixed-effects models. Investment risk is negatively associated with Chinese OFDI at both levels: a one-standard-deviation rise corresponds to roughly one-third of a standard deviation less investment at the country level. The transmission channels divide by level—external conditions (trade, political distance, infrastructure, financing costs) at the country level; risk-taking capacity, uncertainty perception, and financing constraints within firms. Two structural regularities emerge. At the country level, sociocultural soft risk has coefficient magnitudes comparable to political-violence risk despite its small weight in the composite index. Developed hosts respond more strongly than developing ones, with a significant host-group difference at the firm level; risk in developing markets is largely anticipated and priced at entry. The concentration of Chinese OFDI in developing countries reflects risk anticipated in advance, not a preference for risk.