Theorizing Belt and Road construction mode from institutional and cultural perspectives

  • LIU Weidong , 1, 2 ,
  • YAO Qiuhui 1, 2
  • 1. Key Laboratory of Regional Sustainable Development Modeling, Institute of Geographic Sciences and Natural Resources Research, CAS, Beijing 100101, China
  • 2. College of Resources and Environment, University of Chinese Academy of Sciences, Beijing 100049, China

Liu Weidong, PhD and Professor, specialized in economic geography, regional development and the Belt and Road Initiative studies. E-mail:

Received date: 2020-11-04

  Accepted date: 2021-03-02

  Online published: 2021-07-25

Supported by

Strategic Priority Research Program of Chinese Academy of Sciences(XDA20080000)


Copyright reserved © 2021. Office of Journal of Geographical Sciences All articles published represent the opinions of the authors, and do not reflect the official policy of the Chinese Medical Association or the Editorial Board, unless this is clearly specified.


There is a gap between the great vision and high-quality targets of the Belt and Road Initiative (BRI) and Western recognition of them, which challenges Chinese and Western scholars. This gap should be narrowed by conducting in-depth case studies and comparative studies at the project level. In recent years, the international academic community has paid increasing attention to Chinese outward foreign direct investment (FDI), but Belt and Road construction is much broader in scope, comprising not only FDI projects but also China-financed projects and emerging mixed projects. Our investigation, observation, and examination of the BRI projects find that compared to their Western counterparts, Chinese enterprises have less experience in doing business in other countries and often pay less attention to institutional and cultural differences between China and the host countries. Thus, revisiting the institutional and cultural turn in economic geography and employing its ideas to analyze the BRI projects and summarize their construction modes may contribute to the development of both economic geography and the BRI. This paper first briefly reviews the background and research trends of the institutional and cultural turn and then summarizes three major modes of Belt and Road construction, namely, EPC (Engineering Procurement Construction)-based projects, concession-based projects, and FDI; finally, it draws on the institutional and cultural turn to classify the BRI projects according to the two indicators of “Breadth and Depth of Territorial Embeddedness” and “Destructive Effect of a Project and/or Technology” into four types: transformative, supportive, ordinary projects and overseas industrial cooperation parks. Different institutional and cultural sensitivity can be observed for each type of project. The preliminary theorization proposed in this paper may offer a potential framework for further research on the BRI.

Cite this article

LIU Weidong , YAO Qiuhui . Theorizing Belt and Road construction mode from institutional and cultural perspectives[J]. Journal of Geographical Sciences, 2021 , 31(5) : 623 -640 . DOI: 10.1007/s11442-021-1862-8

1 Introduction

The Belt and Road Initiative (BRI) has been proposed and implemented for seven years and become a platform for many countries in the world to explore new types of international cooperation and globalization. By the end of 2019, 138 countries and 30 international organizations had signed memoranda of cooperation or issued joint statements with China on jointly building the Belt and Road. Under the BRI framework, increasing numbers of construction projects have been mentioned and examined by the academic field and by official documents and the media as well, both domestically and internationally; that is, the BRI is being developed at the project level. According to the State-owned Assets Supervision and Administration Commission of China, state-owned enterprises alone have implemented over 3000 projects in the regions along the Belt and Road1( Central state-owned enterprises have implemented 3120 projects under the BRI:, and there has been a larger number of smaller projects implemented by Chinese private companies. Additionally, the core principles of openness and inclusiveness as well as extensive consultation, joint construction and sharing benefits are welcomed by all participating countries, and Chinese President Xi Jinping has repeatedly called for high-quality development of Belt and Road construction, which is targeted at a high standard, pro-livelihood, and sustainable development (Xi, 2019). All this progress suggests that the BRI has been successful. However, the BRI concept remains vague and controversial in international academia (e.g., Jones and Zeng, 2019; Narins and Agnew, 2019). Thus, there is a substantial gap between the development of the BRI and its academic recognition in Western countries (the West hereafter).
The gap occurs for several reasons. First, the BRI is intentionally or unintentionally misunderstood and misrepresented by many authors because of both Anglophone-centric academic traditions (even prejudice sometimes) and the insufficient opportunities to visit BRI projects. As argued by Brautigam (2020), “the simple narrative and the conventional wisdom are contradicted or put into question by field research and empirical findings.” Second, the Chinese government has not provided a clear definition of a BRI project. Many pre-existing engineering, procurement and construction (EPC) projects; overseas industrial parks; and manufacturing projects have been loosely labeled as BRI projects by the media and some Chinese government departments, in the hope of consolidating the so-called early outcomes before any examination of whether or not these projects were conceived in accordance with the BRI vision and principles. Third, Chinese enterprises have insufficient experience in international business. On the one hand, many Chinese global companies continue to lag behind those in Western countries in terms of corporate social responsibility (Mullins et al., 2017); on the other hand, Chinese companies may simply transplant their business experiences into host economies and pay insufficient attention to the institutional and cultural differences, resulting in a phenomenon of “good will coming out with a bad result.” This last reason points to a neglect of academic research on the impacts of the institutional and cultural factors of host countries on Belt and Road construction. Such research can be inspired by the institutional and cultural turn in the field of economic geography in the West.
Along with the rapid development of Belt and Road construction since 2013, the BRI has been attracting increasing attention from academics both inside China and internationally, making it a nascent but burgeoning field of study. A retrieval of Web of Science finds that the number of English papers on the BRI increases quickly from 102 in 2014 to 3389 by August 2020. Since 2018, a number of special issues on BRI studies have been published in internationally refereed journals in English (e.g., Blanchard and Flint, 2017; Liu et al., 2018a; Brakman et al., 2019; Heiduk and Sakaki, 2019; Lai et al., 2020). In China, a search of CNKI with the keyword of “Belt and Road” results in 62,418 journal articles by August 2020, which is 62 times that in 2014.
The research topics in the Chinese and English papers are distinct. The English papers from the West have focused on critical examinations of the BRI and in particular its geopolitical meanings. Many authors have portrayed the BRI as a geopolitical project or at least a process transforming the global geopolitical landscape (e.g., Blanchard and Flint, 2017; Sidaway and Woon, 2017; Flint and Zhu, 2019; Heiduk and Sakaki, 2019; Lin et al., 2019), and others have researched how BRI projects are organized and their impacts on local society (Brautigam and Hwang, 2019; Dwyer, 2020; Han and Webber, 2020a, 2020b; Murton and Lord, 2020). By contrast, there are more pro-BRI papers in Chinese, which attempt to interpret and elaborate on the initiative and suggest how to better implement it. Major topics of Chinese BRI papers are infrastructure connection, “going-out” of enterprises, outward foreign direct investments (FDIs), global governance, trade, and new types of globalization (Liu et al., 2018b). Although several authors have researched Chinese overseas projects (e.g., Brautigam and Hwang, 2019; Han and Webber, 2020a, 2020b), in general, few case studies have applied in-depth fieldwork to investigate BRI projects, which may be one of the reasons for the vague understanding of the BRI.
Against this background, and supported by the Silk Road Environment Program of the Chinese Academy of Sciences, we have endeavored in the last two years to investigate and examine the BRI projects of various types, with an emphasis on the impacts of institutional and cultural factors. After intensive fieldwork on site at over a dozen BRI projects, we find it typical for Chinese enterprises to neglect the institutional and cultural differences between China and the host economies, by simply transplanting business experience and technologies without sufficiently adjusting to local “soil.” Thus, this paper attempts to theorize Belt and Road construction from institutional and cultural perspectives. Section 2 revisits the institutional and cultural turn to capture its major progress and its implications for the BRI studies, and section 3 presents a general discussion of Belt and Road construction and classifies BRI projects according to financing structure and the involvement of Chinese enterprises in operation and management. Section 4 develops an analytical framework for examining the institutional and cultural sensitivity of construction projects and provides several examples that are elaborated in detail by other papers in this special issue. The last section concludes.

2 Revisiting the institutional and cultural turn

To borrow ideas from the institutional and cultural turn to theorize Belt and Road construction modes, a review of the turn is needed. Such a turn in the West first occurred in the early 1990s. Generally speaking, economic geography in the West has experienced three major “turns” after the Second World War (Sheppard and Barnes, 2000). In the 1950s, the post-war boom and the spread of Fordist mass production and “scientism” promotion resulted in a quantitative revolution in the field; in the 1970s, the spread of capitalist economic crisis, decline of traditional manufacturing centers, high unemployment and stagflation as well as demands for human rights, democracy and social structural reform in social science, made the Marxist political economy the major theoretical resources of economic geography; since the 1990s, economic globalization and the rapid development of information technology have resulted in rapid growth of FDI and substantial changes in production modes, consumption patterns, labor relations and welfare systems, leading to an “institutional and cultural turn” in economic geography. The recent development of relational geography, global production networks (GPNs), and evolutionary economic geography (EEG) approaches could be roughly included in this latest turn at a risk of too simplification.
The emergence of the institutional and cultural turn had a profound social background (Amin, 1999; Peck and Tickell, 1994; Scott, 2004). First, the capitalist mode of production was transformed from Fordist mass production to post-Fordist flexible production and expanded globally under the impetus of a transportation and information technology revolution. In the process of global spread and functional integration, the relationship within and between firms and regions has become more complex and has to address governance differences. Second, the decline of traditional industrial districts and the rise of new industrial districts and trans-regional issues have promoted the discourse of multi-scale governance. Third, along with transnational corporations’ rapid global expansion, cross-border flows of goods, capital, labor, and knowledge have increased tremendously, confronted with a lot of institutional and cultural differences between countries and regions. The BRI as a type of economic globalization will meet the same general background as the West did several decades ago.
The institutional and cultural turn has been boosted by borrowing diversified concepts from other disciplines, such as sociology, economics, political science, and management science, and by broadening the understanding of how formal and informal institutions shape and constrain various forms of economic behavior and practice, including production, consumption, investment, innovation and organizational reform, labor and capital markets, inter-firm relations, and learning (Gertler, 2018). Martin (2000) pointed out several key themes of institutional turn; that is, identifying the role of different types of institutions that shape the space economy, emphasizing the evolution of the economic landscape, unpacking the spatio-institutional foundations of technological innovation and diffusion, considering the cultural foundations of the space economy, and focusing on the social regulation and governance of regional and local economies. By contrast, Yeung (2003) argued that the key features include understanding the social embeddedness of economic action; mapping how the shifting identities of social actors are spatially and discursively differentiated by gender, ethnicity, class, and culture; and exploring the role of material and discursive contexts in shaping economic behavior.
The concepts of institutions and cultures are complex. Some scholars have regarded institutions as rules, conventions, traditions, and routines that shape, constrain, and enable economic behavior (Martin and Sunley, 2015; Gertler, 2018); other scholars have included organizations aside from institutional environment (Cooke et al., 1997; Farole et al., 2011); still others have conceived institutions as shared understandings of best-practice technologies, key concepts, signs, and expectations and stabilizations of correlated interaction (Gertler, 2004; MacKinnon et al., 2009). For example, the regional innovation systems approach concerns the “hard” institutional forms such as governments, research organizations, banks, venture capital and training organizations, and the new industrial district and learning regions approaches focus on “soft” institutions of socio-cultural networks that facilitate trust and collaboration (Cumberset al., 2003). In general, the first denotation is most commonly applied, that is, institutions are the broader institutional environment and institutional arrangement, including both the formal institutions of codified and specific rules and the informal institutions of tacit and ambiguous routines. “Cultures” are systems of shared ways of life, norms, traditions, and values that the members of a society or group hold (Coeet al., 2012). For instance, some studies have revealed the influence of Confucian culture on economic activities in East Asian countries, including such concepts as loyalty, collectiveness, harmony, respect for elders, and obedience to authority (Bell and Hahm, 2003; Jong, 2012; Yang, 2012). In this paper and in this special issue as well, we will take institutions as broader institutional environment and arrangement and cultures as shared ways of life, norms, traditions and values.
Institutions and cultures are complex evolutionary processes; they are reflexive; they constantly change with the occurrence of economic activities and their spatial results; and they have obvious scale features. Therefore, as Gertler (2010, 2018) suggested, an institutional turn of economic geography must accommodate individual agency, institutional evolution, inter-scalar relations, and comparative methodologies by focusing on the questions of how regional institutions interact with national institutions, the processes of institutional change, the role and influence of individual agency, and the extent to which the path and direction of institutional evolution are predictable. In summary, the institutional and cultural turn focuses more on the multi-scale features and inter-scale interactions of institutions (Brenner, 1999; Sheppard, 2002; Pike et al., 2015), co-evolution of institutional and economic processes (Martin and Sunley, 2015), the impact of various actors on institutional evolution (Phelps and Wu, 2009; Coe and Yeung, 2015), and interactions between different institutions and cultures (Christopherson, 2002; Dicken, 2003; Phelps and Waley, 2004;Whitley, 1998). Nonetheless, most studies have focused on the socio-economic transformation of developed countries and the institutional and cultural differences encountered in their FDI in developing countries, and the research objects have rarely been outward FDI of developing countries (Li, 2004; Lv and Wei, 2005).
Although economic geography in China has made great efforts to learn Western theories and research paradigms since the opening and reform in 1978, it has developed along a specific path of “promoting the discipline through fulfilling practical tasks” (Liu et al., 2011). Such development is closely related to the social and economic transformation and institutional reform in the past 40 years. There are similarities and obvious differences in research objects, theoretical issues, and explanatory dynamics between Chinese economic geography and its counterpart in the West. In particular, the social and economic structure and governance system of China determines that institutional rebuilding related to opening and reform and formal institutions such as macro planning, development strategy, and spatial governance at the national and local levels are the dominant factors of economic spatial transformation, which to a certain extent expands the scope of institutions defined by Western economic geography as formal institutions of codified, specific rules and informal institutions of tacit, ambiguous routines (Liu, 2003; Liu and Lu, 2004; Liu, 2014). Accordingly, economic geography in China has not experienced the same “institutional and cultural turn” as that of the West. Notably, the study of institutional factors in Chinese economic geography has evolved with the opening and reform of China. In addition, Chinese economic geography has paid less attention to cultural factors in studying both domestic spatial development and overseas investments.
On the one hand, although the institutional and cultural turn in the West is significantly meaningful for understanding Belt and Road construction, it cannot be directly “transplanted” to the case study of Chinese overseas investments. On the other hand, the discussion of institutional factors in economic geography in China mainly serves the current situation and demands of domestic social and economic development, which is also difficult to directly apply to research on overseas investments (Fan, 2007; Gu, 2011; Liu et al., 2010; Lu, 2009). As a new platform of “going out”, Belt and Road construction presents new directions for the theoretical development of economic geography. Different from Western FDI in the last several decades that is safeguarded by the global expansion of neoliberalist ideology to decrease the risks related to institutional and cultural differences, the BRI advocates “extensive consultation, joint contribution and sharing benefits” and a new mode of international cooperation that is mutually beneficial. Under this background, continuous efforts are required to conduct in-depth research and comparative case studies of Belt and Road construction at the project level by learning both from Western economic geography, particularly the institutional and cultural turn, and the knowledge accumulation of China’s economic geography.

3 Classification of Belt and Road construction projects

To understand construction modes of the BRI, one has to be clear about what a BRI project is. This is one of the BRI questions that generates most concern in both the academic field and the media, and yet has no official answer from the Chinese government. Official documents and the media of China have mentioned many projects that were given a prefix of the BRI, but no definition or criterion is available. Indeed, many pre-existing projects were used to consolidate the progress of Belt and Road construction. Broadly speaking, all China-related projects in the countries along the Belt and Road, whether they are Chinese FDIs and Chinese-financed projects or other types of international cooperation projects, can be considered BRI projects. However, this broad definition could be confusing, which makes the BRI a floating signifier or an umbrella (Dwyer, 2020). Narrowly defined, only those projects derived from or included in cooperation and dialogues between China and the countries along the Belt and Road should be considered BRI projects, because reinforcing inter-governmental cooperation is a key feature of the BRI (Liu et al., 2020).
Such vagueness is also from the geographical scope of the BRI. At present, there are two paralleled geographical definitions of the BRI. One definition comprises 64 countries along the ancient Silk Road (see Liu et al., 2020 for a list), which were expected by the Chinese government in the early days to be the most likely participants in the BRI. These countries are often called the Silk Road countries. Most of these countries have signed memoranda of agreement with China on jointly building the Belt and Road. The other definition is much longer and comprises all the countries that have signed memoranda of agreement with China on the BRI. The geographical coverage of this list has expanded from the Eurasian continent to Africa, Latin America, and Oceania. As of the end of 2019, there were 138 of these countries on this list. However, most statistical data remain confined to the short list of countries, whereas the research on the BRI, particularly construction projects, often investigates a larger geographical scope and a longer list. This paper follows the same geographical rule in presenting its research in order to use existing statistical data and references.
Compared with the FDI topics that geographers have studied since the 1960s, the BRI involves more than FDI, and the majority of the so-called BRI construction projects are not about FDI but Chinese financing in the countries along the Belt and Road. For example, by 2018, the stock of China’s FDI in the Silk Roads Countries was 173 billion USD (approximately 55% pre-dated the announcement of the BRI in 2013), and the estimated outstanding loans of Chinese financial institutions in these countries was 350 billion USD (Liu et al., 2020). Thus, geographers must advance beyond FDI theories if they want to study the BRI at the project level. Existing FDI theories may not be able to account for financing or mixed projects. In general, if a BRI project is merely about borrowing from China or about EPC, there is little room for geographers to study. However, in practice, many Chinese financing projects involve not only EPC but also operation for a period of time because host economies have an insufficient capacity of management, which makes prominent such geographical issues as spatial organization, linkages between Chinese companies and localities, and impacts on local society and environment. How to understand the spatiality of this type of project opens a new door for geographers to investigate the BRI issues from a much broader perspective than traditional FDI research, which may be a future research topic but not the focus of this paper.
Although Asian Infrastructure Investment Bank (AIIB) and the Silk Road Fund (SRF) have attracted attention, they are minor financial sources for the BRI construction in terms of outstanding loans (Figure 1). The major financial resources are from the Export-Import Bank of China (EXIMB, 40% of the total outstanding loans, 350 billion USD), China Development Bank (31.5%) and major state-owned banks (23%), for example, Industrial and Commercial Bank of China, China Construction Bank, Agriculture Bank of China and Bank of China. In addition, to finance the BRI, China has set up more than 20 special funds (amounting to over 1500 billion USD) and more than 10 multilateral international financial institutions such as the bank consortiums of the Shanghai Cooperation Organization, China-ASEAN, China-Central and Eastern Europe, and China-Arab; the AIIB and SRF are the most famous among them. The Export-Import Bank of China is the only financial institution offering concessional government loans and preferential export buyers’ credits, and China Development Bank provides development financing. The preferential loans and development finance are the two major financial sources for many developing countries to build infrastructure, and in most cases, they need a government guarantee.
Figure 1 Distribution of China’s outstanding loans in countries along the Belt and Road by major financial institutions (source: Liu et al., 2020)
Based on the above brief introduction to Belt and Road construction and in-depth on-site investigations, two factors are identified and used to make a rough classification of the BRI projects: financing structure (from FDI to loans) and degree of the involvement of Chinese companies in operation and management (involvement degree, hereafter). Involvement degree is used as an indicator because it points to the role of institutional and cultural factors in Belt and Road construction; that is, higher involvement degree higher impacts of local institutional and cultural factors. To a certain degree, different types of construction projects in the classification can represent different modes of Belt and Road construction. Figure 2 illustrates such a classification.
Figure 2 Classification of the Belt and Road construction projects

EPC+F: Engineering Procurement Construction + Financing; EPC+O: Engineering Procurement Construction + Short- term Operation; EPC+I: Engineering Procurement Construction + Some Investment; PPP: Public-Private Partnership; BOT: Build-Operate-Transfer; BOOT: Build-Own-Operate-Transfer

The first type is EPC-based projects. In the last two decades, Chinese companies obtained more than half of the EPC contracts in infrastructure building in the world. However, not all those EPC projects are BRI projects. For example, the water supply project in Katmandu in Nepal, financed by Asian Development Bank (ADB) and built by Sinohydro as an EPC contractor, cannot be considered a BRI project because no Chinese financing was involved; thus, it is just an EPC project. By contrast, the Subway Line R6 project in Bangalore, India, co-financed by AIIB and European banks, and the highway project in Batumi, Georgia, co-financed by the AIIB and ADB, are BRI projects (Yao et al., 2019). That is, only the EPC projects that involve Chinese financing should be classified as a BRI project (EPC+ Financing). In some cases, after concluding EPC, the Chinese contractor is asked and contracted to operate the project for a period of time because the locality lacks the capacity to do so, resulting in an “EPC+Operation” project or mode. This type of project demands deeper involvement of the Chinese companies in local society. Many EPC projects for railway construction in developing countries are eventually in this category (see a case study of the Mombasa-Nairobi Railway in Wang et al., 2020). Additionally, because the chance to obtain EPC contracts in the market is decreasing, some Chinese companies try to be a shareholder or investor of the target project to obtain the EPC contract, which leads to an “EPC+Investment” project or mode (Figure 2).
The second type is concession-based projects, including the burgeoning PPP (public-private-partnership) and long-standing BOT (build-operation-transfer)/BOO (build-own- operation)/BOOT (build-own-operation-transfer) projects. These projects are positioned between FDI and foreign borrowing (EPC+Financing). The PPP model is a well-researched topic in financial studies and is attracting attention from scholars studying the BRI (Liu, 2019). PPP often occurs in the area of public utilities building, such as water supply or sewage treatment, where their return is low and realizing it takes a long time. The literal meaning of PPP is simple to understand because it means a partnership between the government and private companies. Many PPP projects have been related to Belt and Road construction.
Notably, the China-Laos railway project is new and exceptional. The business owner of this railway is the China-Laos Railway Company, a joint venture involving China Railway Corporation, China Investment Corporation, Yunnan Investment Corporation, and Laos Railway Corporation on behalf of Laos government (Figure 3). Its financing arrangement is structured as 40% of its investment from equity, and the remaining financing is from loans of Chinese financial institutions such as EXIMB. The joint venture has a concession contract from the Ministry of Public Works and Transport of Laos to own and operate the railway for 50 years. Thus, the China-Laos railway project represents a new mode of Belt and Road construction, particularly overseas railway construction.
Figure 3 Construction mode of the China-Laos Railway
The PPP mode overlaps with BOT in terms of their preconditions for concession agreements. BOT has been prevailing in the field of infrastructure construction in the last 100 years and is based on a concession contract with the government. To satisfy different conditions, BOT has developed into various derivates such as BOO, BOOT, and BLT (Build- Lease-Transfer). The difference between PPP and BOT is risk sharing. In the PPP mode, the government shares some risks, whereas all risks are incurred by contractors in the BOT alike modes. In the field of Belt and Road construction, the Karot Hydropower Plant in Pakistan, built and operated by China Three Gorges South Asia Investment Ltd (CTGSAI), is an example of the BOOT mode (Figure 4). CTGSAI is a joint venture involving China Three Gorges International, SRF and the International Financial Corporation of the World Bank group, and it will invest, own, and operate the Karot project under a concession agreement with the Pakistan government for 30 years. CTGSAI also has wind power plants in Pakistan. The business owner of BOOT projects must manage greater risk because its long-term operation may meet policy changes and political changes. The PPP and BOT alike modes are becoming popular in Belt and Road construction, and they are neither traditional FDI nor EPC projects; they demand more attention from geographers. The third type is traditional FDI mode, which has been the subject of research in geography for a long time and thus no elaboration is required.
Figure 4 Construction mode of the Karot Hydropower Plant in Pakistan

4 Understanding Belt and Road construction modes by institutional and cultural sensitivity

Although extensive research has been done on the outward FDI of China since the early 21st century and some of the research has focused on institutional factors, it is still insufficient for understanding and guiding Belt and Road construction. One reason is that Belt and Road construction involves much more than FDI, as discussed in the last section; the other is existing research on outward Chinese FDI focuses on quantitative analysis or case studies without sufficient generalization of the impacts of institutional and cultural factors.
For example, Buckley et al. (2007) investigated the determinants of Chinese outward FDI and proposed three explanations—capital market imperfections, special ownership advantages, and institutional factors—that need to be nested with the general factors of market-seeking, resource-seeking, political risks, and geographical and cultural proximity. Some scholars elaborated the particularity of Chinese outward FDI (e.g., Alon et al., 2018) by arguing that institutional factors of a host country and home country have a direct impact on the composition of Chinese outward FDI and their decision-making and investment behavior (Morck et al., 2008; Peng et al., 2008, 2009).
Other scholars investigated the differentiated behavior of Chinese state-owned enterprises and private enterprises in making outward direct investments (Amighini et al., 2013; Buckleyet al., 2018). The relationship between SOEs and the home government enables them to reduce investment risks through inter-governmental relations and protect their investments from the influence of corruption and adverse policy changes through coordination with the interests of the host government (Oneill, 2014). By contrast, private enterprises can have different institutional choices. Private enterprises are more willing to invest in economies with similar institutional environments, because of their experience with operation in the complex institutional environment of their home country (He et al., 2015), but they have their particular difficulties, including the immature capacity of decision-making and corporate governance, labor conflicts caused by institutional and cultural differences, and conflicts with local communities.
In recent studies of the BRI, many authors examined the role of institutional and cultural factors. For example, Lu (2020) argued that local land politics must be considered in making investments in countries like Laos, and Trin (2019) revealed that domestic political conditions in Thailand, namely, interparty conflicts, judiciary intervention, and existing bureaucratic procedures, had hindered the realization of the Sino-Thai HSR project. Other authors found that corporate social responsibility, building up ‘sense of ownership’ and intensive interactions with local stakeholders were critical for Chinese firms to invest in countries along the Belt and Road (Song et al., 2018; Liu and Lim, 2019; Mullins, 2019; Shi and Yao, 2019; Han and Webber, 2020a).
Although these studies have addressed institutional and cultural issues and are meaningful for understanding the BRI, they provide insufficient references for Belt and Road construction by giving the broad spectrum of the BRI projects (Figure 2). They tend to focus on one type of project or one sector, and are not able to offer a general picture of the construction modes from institutional and cultural perspectives. A kind of generalization thus is needed to sort out the institutional and cultural sensitivity of different types of projects.
No doubt, all the BRI projects are undertaken in the specific institutional and cultural context of the host country, but arguably different types of projects may have different sensitivity to institutional and cultural differences between the home and host countries. Based on previous review of the institutional and cultural turn in the West and the investigations, observations, and examinations of dozens of BRI projects (see some of them in this special issue), two major factors are identified to set up an analytical framework to recognize such differences (Figure 5). One factor is the breadth and depth of territorial embeddedness of a project; the other factor is the destructive effect of a project and/or technology.
Figure 5 Illustration of the institutional and cultural sensitivity of different construction projects
Embeddedness has been extensively discussed in Western economic geography since the 1990s (e.g., Yeung, 2003; Liu and Dicken, 2006) and considered a key process of multinational corporation’s investments in a host economy, in particular its embedding into local institutional and cultural environment. But here the term is used differently, not referring to the embedding process or result but the conditions of embedding. Thus, the breadth and depth of territorial embeddedness of a project refers to the spatial scale that the project involves (e.g., a railway passes through a large land area), the extent to which the project may change or transform the local natural environment (e.g., mining changes landscape at least for a period of time), and the size of employment that the project creates (e.g., substantial employment may bring great social impacts). The deeper and broader the territorial embeddedness of a project, the more attention it should pay to institutional and cultural differences.
The idea of a destructive effect, inspired by Joseph A. Schumpeter’s theory of creative destruction, refers to the shock from an external project and/or technology to the market balance and socio-economic structure of a host country. For example, building a modern railway may destruct and restructure the existing transportation system, affecting the local trucking industry. The greater the destructive effect of a project, the more sensitive the project is to institutional and cultural differences.
According to the analytical framework in Figure 5, four types of BRI projects are identified in relation to the classification of projects discussed in Section 3. The first type is a transformative project, whose destructive effect and degree of territorial embeddedness are high. This type of project is by and large EPC-based (Figure 2) and has great potential to transform the local society and economy. A modern railway to be built in the least developed country is a typical transformative project. If an EPC contractor were asked to help operate the project it built, it had to pay more attention to local institutional and cultural environment. An example of Mombasa-Nairobi railway will be discussed later.
The second type is a supportive project, for example, power plants. Most supportive projects are concession-based (PPP or BOT, see Figure 2), and often take place in the public utility sector. On the one hand, a supportive project boosts the local socio-economic system but may help change the consumptive habits of residents; thus, it tends to have a middle-level destructive effect; on the other hand, the territorial embeddedness of such projects is generally focal but may be very deep (e.g., a hydropower plant may have significant ecological effects and a thermal power station may meet the pressure of carbon emission).
The third type is an ordinary project, mainly in manufacturing and general business and in the form of FDI (Figure 2). Such a project generally does not cause great shock to the local socio-economic system and thus has a low sensitivity to institutional and cultural differences. However, mining projects are deeply embedded in the local environment and society, making them very sensitive to both national and local regulations.
The last type is overseas industrial cooperation parks (referring to park development but not individual investment projects in the park), which is in-between FDI and PPP modes as there may be a kind of close cooperation between park developer and the host government. They have a middle level of territorial embeddedness with a land area of several square kilometers up to several dozen. Sometimes, they may have a great destructive effect if their preferential treatments are sufficiently special to create a rivalry with the local society, and the economy or their size is too large.
All the case studies in this special issue can be roughly allocated into this analytical framework and thus can elaborate the framework the other way round. The remainder of this paper briefly introduces several cases. The Mombasa-Nairobi railway is a typical transformative project (Wang et al., 2020). In the beginning, the construction of this railway was an EPC project of the China Road and Bridge Corporation (CRBC). After completion, because the local authority of Kenya had no capacity to operate the railway, the CRBC was asked to help to run it for ten years, based on an operation contract. Operation means the Chinese company has to embed itself more deeply in local society than the construction period, resulting in substantial challenges for the CRBC. A standard gauge railway in China is a simple construction project, without any sophisticated technologies, and should “transplant” easily to Kenya. However, a railway project is a technology-institution-culture nexus with railway technology as its core. After decades of development in China, laws and regulations for the operation and safety of railways have been established and matured to be so “natural” that they do not require concern. However, when such a “simple” railway was built in Kenya, its operation has to manage various challenges. For example, Kenya did not have national laws and regulations to ensure the safe operation of a railway, and Kenyan employees were unaccustomed to the Chinese railway culture that considers operation safety a top priority and uses strict management. Additionally, the operation of the new railway shocked the trucking business in Kenya, resulting in high political tension. Although all these difficulties have been by and large solved and operation has been approaching a normal, successful level, the Mombasa-Nairobi railway project reminds Chinese enterprises of the institutional and cultural differences between China and host countries. These differences must be considered from the very beginning of a project. Only when institutional and cultural “soil” is well recognized and treated can a “transplant” be successful.
The cooper mining and smelting project of China Wanbao in Laibitung, Myanmar, supporting the local economy in terms of revenue and employment, is highly embedded in local territory for both institutional and environmental reasons. Immediately after taking over this project from Canadian Ivanhoe Mines Limited, China Wanbao experienced the regime change of Myanmar from a military government to an elective government; thus, they had to manage to many serious changes, for example, the requisition of land (rising compensation), the resettlement of people losing farmland, environmental protection, the relocation of local pagodas, and the sustainable livelihood of residents (Gao et al., 2020). As a result, although the project seemed impossible, it went into operation in 2016 and achieved win-win-win among the Myanmar government, the Laibitung local community and China Wanbao. The Chinese company removed the institutional and cultural constraints by attempting to create multi-scalar embeddedness with adaptive arrangements. For example, the Chinese company invited a famous Australian company to help the Myanmar government to establish environmental protection laws and conduct environmental and social impact assessments accordingly; invited the Myanmar government in addition to the army-based Myanmar economic holding company to be shareholders of the project to ensure the government’s benefits; and cooperated with non-governmental organizations and made its operation transparent. Overall, this project reveals the importance of multi-scalar institutional embeddedness and interactions between scales.
The three cases of China-Belarus Industrial Park, Thailand-China Rayong Industrial Park, and Cambodian Sihanoukville Special Economic Zone (Sihanouk SEZ) reveal the intermediary role of overseas industrial parks in overcoming institutional and cultural differences and the importance of rescaling and coordination between scales. Such an intermediary role is reflected by the functioning of an “investor garden” that overseas industrial parks create for minimizing the institutional and cultural differences between China and host countries (Chen et al., 2020). The China-Belarus Industrial Park is developed by intensive negotiations between the two national governments and is promoted by the presidents of the two countries. Initially, CAMCE International (an EPC contractor from China) was contracted to build and operate the park, but later, China Merchants, a global business group, was invited to join and lead the operation. The close cooperation between the two national governments and the Chinese global enterprises is what makes the park thus far successful (Liu and Wang, 2020). The Thailand-China Rayong Industrial Park was first a private business developed by the Huali Group from Zhejiang province, China, in collaboration with the Thailand Amata Group; subsequently, it was identified by the China Ministry of Commerce as a National Overseas Economic and Trade Cooperation Zone and by the Zhejiang provincial government as a Demonstration Park for Promoting Belt and Road Construction. By up-scaling from private-private cooperation to a BRI project supported both by the Chinese and Thai governments, the park attracted a lot of attention and hence social capital and resources (Song et al., 2020a).
The China-Laos Mohan-Boten Economic Cooperation Zone is one of the several cross-border economic cooperation zones in China. A study of it revealed the “scale paradox” in the development of such cross-border zones (Song et al., 2020b). A border region is a multi-scalar location because it is not only the interface between neighboring countries but also that between localities of these countries; thus, the governance of a border region demands close cooperation between scales. The reality, however, is disjointing between national, regional, and local governments in that the local government does not have the right to manage cross-border affairs, whereas the central government, especially of a large country such as China, has difficulty implementing differentiated policies to satisfy each locality’s needs. To overcome the “scale paradox” is the premise for good cross-border cooperation.

5 Conclusion

The Chinese government has not clearly defined the BRI projects because Belt and Road construction is still at an evolving stage of exploring suitable means of new cooperation, and new construction modes are being innovated and explored. This is vague and atypical compared to the Western world, which has consistently provided detailed action plans and clear definitions of projects before implementing initiatives. China’s government and companies tend to conduct their business another way: first, they propose a vision, and second, they explore the suitable modes of achieving the vision. This philosophy is called “crossing the river by stepping the stones.”
This paper attempts to draw attention to those projects that are from and/or are incorporated into the cooperation framework between China and countries along the Belt and Road and identifies three major modes of the BRI projects: EPC-based, concession-based, and FDI. Each mode has a different financing structure and a different degree of involvement of Chinese enterprises in management and operation, and all deserve further study. By drawing on the institutional and cultural turn, the paper develops an analytical framework for examining the institutional and cultural sensitivity of a BRI project by two indicators: the breadth and depth of territorial embeddedness and the destructive effect of a project and/or technology. Using the analytical framework, four types of projects can be identified: transformative, supportive, ordinary projects and overseas industrial cooperation parks. Notably, such theorization is preliminary and requires elaboration and modification through further case studies of the BRI projects.
Belt and Road construction has created room for academic research, which deserves further attention from geography, especially economic geography. More case studies of the BRI at the project level are necessary. Similar to the new era of academic development in Western economic geography brought by the institutional and cultural turn in the 1990s, the studies of the BRI from institutional and cultural perspectives will open a new door for Chinese economic geographers and perhaps for all economic geographers worldwide.
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