Trade Agreements and Global Value Chains: New Evidence from China’s Belt and Road Initiative

Abstract

This paper investigates the relationship between China’s trade agreements (TAs) and partner countries’ upgrade in global value chains (GVCs). We focus on the experience of China and relate China’s TAs with one belt and one road (OBOR) initiative. A structural equation model (SEM) is applied on a dataset including 216 countries and regions to identify the direct and indirect effects of China’s TAs and OBOR initiative on its export, outwards foreign direct investment (OFDI) and partner economy’ GVCs upgrade over the period 2010–2015. We find that China’s TA partner countries are more likely to be included in the OBOR initiative than those non-TA partner countries. The positive effects of China’s TAs and OBOR initiative on China’s export, outwards foreign direct investment (OFDI) and partner countries’ upgrade in GVCs differ across country groups at the different locations of GVCs. Both vertical and horizontal spillover effects exist in China’s TAs. Therefore, the partner countries at low end and middle of GVCs might benefit more from TAs with China than those richer countries at the high end of GVCs.

The United States’ Clothing Imports from Asian Countries along the Belt and Road: An Extended Gravity Trade Model with Application of Artificial Neural Network

“…For example, the distance between China and 62 B&R countries in geography (relative geographic distance), factor endowment (capital-to-labor ratio), culture (power distance, uncertainty avoidance, individualism-collectivism, and masculinity-femininity), and institution (measured by the World Bank's Worldwide Governance Indicators) have been found to affect China's exports from 2007 to 2016 negatively [45]. China's trade agreement partnership and the BRI improve China's exports to 216 partner countries from 2010 to 2015 [46]. The connectivity of 30 B&R countries with China in policy coordination, facilities connectivity, unimpeded trade, financial integration, and people-to-people bonds have been found to contribute to their economic growth [47].…”

Impact of Embedded Global Value Chain on Technical Complexity of Industry Export—An Empirical Study Based on China’s Equipment Manufacturing Industry Panel

“…As an important feature of embedded GVC is the importation of intermediate products, and the middle products are important carriers of technology diffusion [4], importing high-quality intermediate inputs can bring significant reverse technology spillovers to China [5,6]. Similarly, China will also bring technology spillover effects to some countries in the low-end of the global value chain [7]. It was further found that the impact of embedded GVCs on export technology content shows significant industry differences, and the technology promotion effect for capital-intensive industries is greater than the technology promotion effect for labor-intensive industries [8,9], because capital-technology-intensive companies have a stronger learning effect when participating in the global division of labor and have a stronger ability to absorb technology [10].…”

Outward foreign direct investment and GVC position of manufacturing industry: A perspective on China’s general trade and processing trade structure

“…Based on their findings, pertinent studies can be split into two categories. On the one hand, some scholars believe that OFDI can enhance a country's GVC position both in the home and host countries [16][17][18][19]. For example, Yang & Luo found that OFDI has raised China's GVC position through reverse technology spillovers [20], While Liu et al discovered that OFDI has helped China ascend in the GVC by promoting product quality and functional upgrading [21].…”