Has China's belt and road initiative positively impacted the economic complexity of host countries? Empirical evidence

Upgrading the production capabilities in all countries is a target of the UN's 2030 Agenda for Sustainable Development Goal 9. Increasing economic complexity, that is, a country's ability to manufacture more sophisticated products and thus moving up the value chain, is a key driver for sustainable economic growth. This paper investigates whether Chinese Belt and Road investments have impacted the economic complexity of host countries - a topic not addressed in the literature to date, using a sequential generalised method of moments model selection approach. The research focuses on the countries whose economic complexities are below that of China. Our empirical results show significant positive effects of Chinese investments on such host countries' economic complexities. The inflows of Chinese investments have thus supported the upgrading of production capabilities in these countries. This is encouraging, especially for the Global South countries, to intensify their interactions with the Belt and Road initiative.