Abstract

The Belt and Road Initiative seeks to deepen China's international integration by improving infrastructure and strengthening trade and investment linkages with countries along the old Silk Road, thereby linking it to Europe. This paper uses detailed bilateral trade data for 1995-2015 to assess the degree of exposure of Belt and Road economies to China trade shocks. The econometric results reveal that China's trade growth significantly affected the exports of Belt and Road economies. Between 1995 and 2015, the magnitude of China's demand shocks was larger than that of its competition shocks. However, competition shocks became more important in recent years, and were highly heterogeneous across countries and industries. Building on these findings, the paper documents the current degree of exposure of Belt and Road economies to China trade shocks, and discusses policy options to deal with trade-induced adjustment costs. Document type: Book

Abstract

This paper studies the impact of transport infrastructure projects of the Belt and Road Initiative on shipment times and trade costs. Based on a new data on completed and planned Belt and Road transport projects, Geographic Information System analysis is used to estimate shipment times before and after the Belt and Road Initiative. Two sets of data are computed to address different research questions: a global database based on an analysis of 1,000 cities in 191 countries and 47 sectors and a regional database that focuses on more granular information (1,818 cities) for Belt and Road economies only. The paper uses sectoral estimates of “value of time” to transform changes in shipment times into changes in ad valorem trade costs at the country-sector level. The findings show that the Belt and Road Initiative will significantly reduce shipment times and trade costs. For the world, the average reduction in shipment time will range between 1.2 and 2.5 percent, leading to reduction of aggregate trade costs between 1.1 and 2.2 percent. For Belt and Road economies, the change in shipment times and trade costs will range between 1.7 and 3.2 percent and 1.5 and 2.8 percent, respectively. Belt and Road economies located along the corridors where projects are built experience the largest gains. Shipment times along these corridors decline by up to 11.9 percent and trade costs by up to 10.2 percent. The paper also shows that these effects are magnified by policy reforms that reduce border delays and improve corridor management. Document type: Article