Trade development between China and countries along the Belt and Road: A spatial econometric analysis based on trade competitiveness and complementarity

• Author: Aiping Yao,Jiyong Chen,Dabo Chen
• Published date: 01 May 2020
• Date: 01 May 2020
• DOI: http://doi.org/10.1111/1468-0106.12329

SPECIAL ISSUE ARTICLE

Trade development between China and

countries along the Belt and Road: A spatial

econometric analysis based on trade

competitiveness and complementarity

Jiyong Chen

1,2

| Dabo Chen

2

| Aiping Yao

3

1

Center for Economic Development Research, Wuhan University, Wuhan, China

2

Institute of US and Canada Economy, Wuhan University, Wuhan, China

3

College of Economics and Management, Southwest University, Chongqing, China

Correspondence

Aiping Yao, College of Economics and

Management, Southwest University,

No. 2, Tiansheng Road, Beibei District,

Chongqing 400715, China.

Email: peggy0410@swu.edu.cn

Abstract

This paper empirically analyses the effect of trade com-

petitiveness and complementarity on the trade develop-

ment between China and the countries along the Belt

and Road (B&R). The study first measures the trade

competitiveness and the complementarity between

China and the countries along the B&R by using the

trade competitiveness coefficient (TCC) and the trade

complementarity index (TCI). Then a spatial gravity

model is constructed to analyse the effect of trade com-

petitiveness and complementarity on trade develop-

ment between China and the countries along the B&R.

We use generalized method of moments (GMM) and

spatial filtering technology to verify the robustness of

the model. The results show that the GDP of China and

the countries along the B&R, the land area of countries

along the B&R, trade complementarity, common lan-

guage, free trade agreements (FTA), and the B&R Ini-

tiative significantly promote the trade development

between China and the countries along the B&R,

whereas the geographical distance between countries

and trade competitiveness significantly inhibit it. Finally,

to promote the trade development between China and

Received: 2 April 2020 Accepted: 9 April 2020

DOI: 10.1111/1468-0106.12329

Pac Econ Rev. 2020;25:205–227. wileyonlinelibrary.com/journal/paer © 2020 John Wiley & Sons Australia, Ltd 205

the countries along the B&R, the present paper puts for-

ward suggestions including improving trade promotion

policies between China and the countries along the B&R

and vigorously expanding cooperation with complemen-

tary industries in the countries along the B&R to

enhance trade dependence.

KEYWORDS

spatial gravity model, the belt and road, trade competitiveness, trade

complementarity, trade development

1|INTRODUCTION

Over the past 5 years, great achievements have been made in the construction of the Belt and

Road (B&R) Initiative. China has signed 149 cooperation agreements with 134 countries and

international organizations.

1

The merchandise trade volume between China and the countries

along the B&R increased from US$694.6 bn in 2010 to US$1.3 tn in 2018.

2

At present, China

has jointly established 82 overseas economic and trade cooperation areas with 24 countries

along the B&R, creating US$2.01 bn in tax revenue and 244,000 jobs for the countries along

the B&R.

3

With the smooth progress of the construction of the B&R, bilateral trade between China

and countries along the B&R has also become an important driving force for China’s trade

development. Yang and Jia (2017) point out that China’s traditional trade advantage was in

labour-intensive processing manufacturing, while the trade advantages of countries along the

B&R were concentrated on resource-intensive products or agricultural products. China and the

countries along the B&R had strong trade complementarity with each other, but the compara-

tive advantage of trade had an insufficient pulling effect on trade growth. Under the back-

ground of a win–win situation formed by expanding the trade scale between China and the

countries along the B&R, we explore the bilateral trade development based on the trade com-

petitiveness and complementarity between China and the countries along the B&R. This is of

great significance for promoting trade and investment cooperation between China and the

countries along the B&R, free flow of elements between China and countries along the B&R to

achieve rational allocation of resources and deep integration of the market, and for China to

shape new comparative advantages and establish a new mechanism for foreign trade develop-

ment focused on propelling value chain upgrading.

At present, the research on the trade competitiveness and complementarity and trade devel-

opment between China and the countries along the B&R mainly focuses on the following

aspects. First, the research considers trade competitiveness and complementarity between

China and the countries along the B&R. Many scholars have studied the trade competitiveness

and complementarity between China and countries along the B&R through statistical analysis

(Han, Luo, & Zou, 2015; Liao, Li, & Cheng, 2017; Long & Shi, 2016; Wang, 2017). Most of them

believe that China’s trade complementarity with countries along the B&R are strong, and that

China’s trade complementarity is higher than trade competitiveness with countries along the

B&R (Han et al., 2015; Li, Chen, Wan, & Chen, 2017; Wang, 2017). Chen and Chen (2018)

206 CHEN ET AL.