This brief is part of the Insights @ Center for Emerging Markets, a publication focused on cutting-edge ideas and advice for global leaders about emerging markets.
By Francisco J. Valderrey (Tecnológico de Monterrey), Federico Trigos (Tecnológico de Monterrey) and Evodio Kaltenecker (Northeastern University)
In Short: This policy brief examines whether China's Belt and Road Initiative (BRI) is primarily building new infrastructure through greenfield investments (where a company starts a new operation from the ground up) or acquiring existing assets through mergers and acquisitions (M&As). Analyzing outward foreign direct investment data from 2005 to 2021, Valderrey, Trigos, and Kaltenecker reveal that M&A is the dominant entry mode for most significant projects, challenging the widespread perception of the BRI as primarily a series of greenfield investments from Chinese enterprises. While energy investment policy remained remarkably steady over the entire period, the finance and transportation sectors experienced significant fluctuations, particularly following the formal announcement of the BRI in 2013. For managers and policy makers in emerging market, these findings suggest that Chinese engagement often involves shifting ownership of existing local assets, requiring sharpened skills in legal, cultural, and environmental negotiations to ensure mutual benefit.
The Belt and Road Initiative (BRI) is frequently portrayed as a global effort by China to build physical infrastructure, such as roads and power plants, across various continents. Some observers have described it as one of the most ambitious geopolitical and economic infrastructure investment strategy in history. However, recent research by Valderrey, Trigos, and Kaltenecker suggests that the “building” narrative tells only half the story. By analyzing Chinese outward foreign direct investment from 2005 to 2021, they clarify whether China is primarily building new assets through greenfield investments or M&As. Their central finding is that M&A is the preferred entry mode for most significant projects, meaning China is simultaneously buying and building a New Silk Road across global markets.
The research identifies three distinct periods in Chinese global investment: an ascent from 2005 to 2015, a peak in 2016 and 2017, and a subsequent decline through 2021. Interestingly, while many associate the BRI with new construction, greenfield investments never exceeded 50% of the annual investment volume during the seventeen years studied. In fact, approximately 74% of the total value of Chinese global investment was directed toward acquisitions, compared to only 26% for greenfield projects. M&A is preferred due to excess financial capacity and the need to acquire advanced technology, established brands, and rapid access to new markets. Furthermore, the study notes a shift in the nature of Chinese enterprises going global. While large state-owned enterprises (SOEs) historically led the charge, the landscape has transitioned from a phase of rapid, extensive expansion to a more regulated, “intensive” approach where Beijing has strengthened supervision and regulation of outbound investment to mitigate financial risk, squeeze out bogus investment, and improve efficiency.
The study specifically examined the energy, finance, and transportation sectors. It found that while investment policy in the energy sector remained remarkably steady over the entire period, the finance and transportation sectors experienced significant fluctuations, particularly following the formal announcement of the BRI in 2013. The COVID-19 pandemic further altered the landscape, leading to a dramatic drop in Chinese investment in advanced economies like the United States and Europe due to rising geopolitical hostilities. This has made less economically developed countries the preferred destinations for Chinese enterprises, although these nations are no match to replace the lost opportunities in the United States and Europe. For instance, in Latin America, the BRI represents a repackaging of existing relations and the continuation of trends that have been underway since the global financial crisis.
Managerial and Policy Implications
For decision makers in emerging markets, these findings suggest that Chinese engagement often involves a change in ownership of existing local businesses rather than the creation of new physical infrastructure. This distinction is critical because acquisition deals carry unique risks and complexities that differ from construction projects. These include managing company and country-level cultural differences, navigating local legal frameworks, and addressing environmental and impact of labor controversies. The study also suggests that Chinese firms' preference for M&A reflects a strong belief in their capacity to absorb foreign knowledge, which may be a problematic assumption given the vast cultural differences between home and host countries. Managers and policymakers should prioritize sharpening their skills and expertise in legal issues, cultural management, and expert negotiation to handle these complex deals from all angles. Rather than viewing the BRI solely as a source of new construction funds, local leaders should recognize the opportunity to attract Chinese investors by offering well-aligned acquisition targets. Ultimately, the success of these projects depends on mutual collaboration and the ability of host nations to manage the intricacies of buying as much as building a New Silk Road.
Original Work
Valderrey, F.J., Trigos, F. & Kaltenecker, E. (2025) Belt and Road Initiative: building or buying a New Silk Road?, European Journal International Management, 27(4): 533–565.
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