Capacity utilization loss of the Belt and Road countries incorporating carbon emission reduction and the impacts of China's OFDI

The countries along the Belt and Road (B&R countries) are getting growing attention in capacity utilization. In the context of climate change, it is advisable to incorporate carbon emission reduction requirements into capacity utilization loss (CUL) estimation. This study builds a novel model to estimate CUL with the constraint of carbon emission reduction using the sample of 46 B&R countries from 2003 to 2016. For a clearer insight, the CUL is further decomposed into environment inefficiency loss (EIL) and equipment utilization inefficiency loss (EUL). Finally, the Tobit regression models are employed to examine the effects of China's outward foreign direct investment (OFDI) on CUL and its compositions. The main findings are as follows: (1) the CUL and EIL in B&R countries is increasing, and the EUL is gradually decreasing; (2) Iran, Thailand and Saudi Arabia suffer from the top three CUL values, and only four countries have been fully utilizing their capacity; (3) China's OFDI contributes to the improvement of equipment utilization of B&R countries. These findings are expected to be helpful in improving capacity utilization of B&R countries and providing useful reference information to foreign investors.