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How does the “Belt and Road” Initiative affect Debt Sustainability?

The Belt and Road Initiative (BRI) has opened new financing channels, promoting sustainable debt management and high-quality economic growth in China and BRI-participating countries. This paper, using sample data from 64 BRI-participating countries and 40 non-BRI countries from 2002–2021, employs the difference-in-differences (DiD) method to examine BRI impacts on government debt sustainability. Empirical results passing robustness tests reveal heterogeneous effects. Findings indicate: first, the BRI enhances government debt sustainability in participating countries; second, government spending, foreign direct investment, and international trade moderate economic development; third, the BRI exhibits heterogeneity by income, debt levels, and growth rates.[…]