Belt and Road: The China Dream?

Jackson, K. and Shepotylo, O. 2021. Belt and Road: The China Dream? China Economic Review. 67 101604. https://doi.org/10.1016/j.chieco.2021.101604

TitleBelt and Road: The China Dream?
TypeJournal article
AuthorsJackson, K. and Shepotylo, O.
Abstract

This paper explores the impact of the Belt and Road Initiative (BRI), in terms of changes in trade costs on trade and consumer welfare in China, the EU, and the rest of the World. We employ a general equilibrium structural gravity approach and conduct a counterfactual analysis. Our key findings are as follows: (i) China and the EU are expected to make substantial gains from the BRI due to reductions in transport costs (ii) signing and implementing a deep FTA between China and the EU is equivalent to transport cost reductions of 15-20 percent (iii) the joint policy of the BRI and FTA is super-additive, magnifying the gains from the separate policies (iv) where transport cost reductions are 20 percent or more, the potential negative effect of the China-US trade war on China is more than compensated for by the BRI initiative. Our results provide evidence that the BRI has the potential to deliver significant welfare gains, particularly if combined with other trade integration schemes, and to counterbalance aggressive trade policies.

KeywordsBelt and Road Initiative
China
EU
Gravity model
trade
Article number101604
JournalChina Economic Review
Journal citation67
ISSN1043-951X
Year2021
PublisherElsevier
Accepted author manuscript
License
CC BY-NC-ND 4.0
File Access Level
Open (open metadata and files)
Digital Object Identifier (DOI)https://doi.org/10.1016/j.chieco.2021.101604
Publication dates
Published online22 Feb 2021
Published in printJun 2021

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Under embargo until 22 Aug 2022
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