China contributes to poverty reduction in developing countries along the Belt and Road (B&R) by the way of aid and investment, taking infrastructure construction as a break through and state-owned capital as the main force. The empirical study of the B&R countries’ panel data of 2000–2017 shows that Chinese aid and investment help to reduce poverty rate, and there is a threshold effect between investment and poverty rate reduction. When the per capita GDP level is below the threshold value, the poverty reduction effect of Chinese investment is more significant. Different types of aid and investment generate different poverty reduction effects: construction project investment and green land investment have more significant effects, and poverty reduction mechanism based on infrastructure construction has better poverty reduction effect than transfer payment aid. The correlation between state-owned enterprise investment and poverty rate reduction is significant, and state-owned capital plays an important role in poverty reduction in the B&R developing countries. The research also finds that poverty reduction effect of Chinese aid and investment is realized mainly by capital formation and job creation in these countries.
Keywords: foreign aid, investment, poverty reduction, the Belt and Road
China Finance and Economic Review
Volume 8 Number 1 Spring 2019.P73