Risk or opportunity? The Belt and Road Initiative and the role of debt in the China-Central Asia-West Asia Economic Corridor

This Research Note provides an empirical contribution to the discussion on the debt implications vis-a-vis the unfolding of the Belt and Road Initiative (BRI). For this purpose, we analyze the impact of external debt and other relevant factors on the economies of the China-Central Asia-West Asia Economic Corridor using panel data over the period 1996-2018. The reasons we focus on this geographic area are threefold: first, these countries form a key part of the BRI with historical connections to the Silk Road; second, it provides a unique combination of economies in transition such as the former Soviet Union countries and larger economies such as Iran and Turkey; and last but not least, this corridor has received relatively less attention in the related literature. Among the main findings is that debt service on external debt has a positive effect on GNI per capita, both with and without China in the empirical analysis. As another key component of this major development strategy, infrastructure is also found to have a positive impact. The results thus foreshadow growing opportunities as the BRI unfolds, albeit with foreseen issues related to debt sustainability, ecological and wellbeing considerations.

Automated summary

This Research Note provides empirical evidence on the debt implications of the Belt and Road Initiative (BRI) by analyzing the impact of external debt and other factors on the economies of the China-Central Asia-West Asia Economic Corridor. The study finds that debt service and infrastructure have a positive effect on the economies, highlighting the potential opportunities and challenges for the BRI.