Does the Belt and Road Initiative promote China and the countries along the route to reconstruct the global value chain? Evidence from value-added trade

Abstract

The current global value chain's (GVC) inequalities impede sustainable development in China and countries along the route (B&R countries), but the Belt and Road Initiative (BRI) fosters mutual economic cooperation, offering an opportunity to deepen bilateral value chain cooperation and reconstruct GVC. Existing literature suggests that under BRI, GVC reconstruction between China and B&R countries is feasible and necessary, yet empirical evidence on BRI's impact and pathways is scarce. Treating this as a quasi-natural experiment, we analyse data from 54 countries (2007-2021) using a Difference-in-Differences approach. Results show that BRI significantly promotes GVC reconstruction between China and B&R countries, with effects strengthening over time. Moreover, the BRI's promotion effects are more pronounced for GVC reconstruction between China and Asian countries along the route and B&R countries with middle-low- & middle-high-incomes. Expanding bilateral trade, enhancing capacity cooperation, and improving infrastructure connectivity are key mechanisms through which BRI drives GVC reconstruction.