Has China’s Belt and Road Initiative Intensified

The Belt and Road Initiative (BRI) is designed to intensify reciprocal trade preferentiality between China and the Belt-Road countries. However, there has been little research empirically examining the policy effects on the trade links between China and the involved countries. This paper attempts to evaluate the BRI effects quantitatively by constructing a new bilateral revealed trade preference index to measure the bilateral trade preferentiality between China and its 114 trading partners. Using a difference in differences model, we show that the trade of China with the Belt-Road countries has become more preferentially linked since the implementation of the BRI. In particular, the bilateral revealed trade preference index between China and the Belt-Road countries has grown approximately 8% faster than has that with the non-Belt-Road countries. We further show that the BRI effects are heterogeneous across different regions. The bilateral trade links have been more significantly intensified in the regions of the China-Indochina Peninsula Economic Corridor, the China-Pakistan Economic Corridor, the China-Central Asia-West Asia Economic Corridor and the Bangladesh-China-India-Myanmar Economic Corridor belt and road trade. The findings strongly indicate that BRI has been acting as a catalyst for intensifying bilateral trade preferentiality between China and the Belt-Road countries.

The Belt and Road Initiative (BRI), described as “China’s grand connectivity blueprint, ” is the most ambitious international project that China has initiated since 2013 [1-3]. The BRI aims to stimulate economic growth by strengthening inter-regional cooperation over a vast area covering sub-regions in Asia, Europe, and Africa, as the grand project has highlighted five different priorities for China and the BRI participating countries: policy coordination, unimpeded trade, facility connectivity, financial integration, and the bond between people [2,4]. In particular, it signals a shift in China’s foreign policy toward prioritizing the trading relationship with her neighboring countries [5,6]. The dominant purpose of the BRI is to adopt a win-win mode of an integrative economic project that is free of geopolitical strategy at the regional level [3-9]. During the past seven years, China’s economic cooperation with the Belt-Road countries has achieved remarkable results. On the one hand, the bilateral trade between China and Belt-Road countries has significantly increased. The total trade value of goods between China and Belt-Road countries had exceeded $7. 8 trillion from 2013 to 2019, according to the data reported by the Ministry of Commerce of China. In 2019, the growth of bilateral trade between China and countries along the Belt and Road reached 10. 8 percent, outpacing China’s aggregate trade growth by 7. 4 percentage points [10]. As for the sub-regions, the growth in bilateral trade between China and the Association of Southeast Asian Nations (ASEAN) achieved the highest year by-year increase, at 14. 1 percent, outpacing those with the other two vital trading partners: the united states (US) and the european union (EU) [11]. On the other hand, facility connectivity represented by the six economic corridors under the BRI has been strengthened significantly. The enhancement of regional connectivity of the six economic corridors under the BRI, which include the new Eurasia Land Bridge Economic Corridor (NELBEC), the China-Central Asia-West Asia Economic Corridor (CCWAEC), the China-Mongolia-Russia Economic Corridor (CMREC), the China-Indochina Peninsula Economic Corridor (CICPEC), the Bangladesh-China-India-Myanmar Economic Corridor (BCIMEC), and the China Pakistan Economic Corridor (CPEC), has facilitated the trade flows along the corridors. A prominent example is that the successful running of Nanning, China-Hanoi, and Vietnam Cross-Border container trains [12], has significantly stimulated the trade flows along the corridor of CICPEC. In light of the above achievements in China’s economic cooperation with the Belt-Road countries, the purpose of the paper is to provide a quantitative assessment of BRI’s priority of “unimpeded trade. ” In particular, we endeavor to answer the following questions: How to quantitatively assess the impact of BRI on the reciprocal trade preferentiality between China and the Belt-Road countries? Does there exist any significant regional heterogeneity of the BRI effect?

This topic is very important for several reasons: (1) Trade integration has important implications for business cycle synchronization [13,14], and there is substantial empirical evidence indicating that business cycles are more synchronized in countries with strong trade intensity [15-17], which provides further indication of policy coordination [18,19], one of the five priorities of the BRI; (2) Bilateral trade links have always played an important role in the overall relationship between countries. In a world economy that increasingly has a regional architecture, national developments and regional trajectories will be intertangled [20], so that countries with more intense reciprocal trade links are inclined to have fewer trade conflicts. For example, Brülhart and Thorpe [21] find that the increase in “two-way” trade among the East Asian economies reduces the labor market adjustment costs and, hence, reduces the trade friction between nations and has led to the extraordinary growth in exports from the 1970s to the mid−1990s. (3) Trade integration encourages the reallocation of resources to more efficient activities and thus opens up opportunities and boosts demands and employment [22-24]. This is particularly important within the context of the foreseeable global economic adversity caused by the Covid−19 pandemic. (4) Estimating the impact of the BRI on the trade links quantitatively may provide policymakers with valuable references about making further free trade arrangements with the Belt-Road countries.

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