Evolution of the bilateral trade situation between Belt and Road countries and China

Abstract

The Belt and Road Initiative's (BRI) potential impact on bilateral trade between Belt and Road countries (BRCs) and China is hotly contested. It is crucial to clarify what changes in the trade situation of China-BRCs bilateral trade before and after the BRI, including economic gains and environmental costs. This study applies the decomposition of production activities method to calculate the value-added (VA) and embodied CO2 emissions (ECE) transfer in China-BRCs bilateral trade from 2004 to 2017. The relevant results are fourfold. (1) The growth rates of China's VA exports and ECE exports to the BRCs are 1.44 times and 1.36 times higher than the growth rates of imports. (2) Electricity, iron and steel, and chemical rubber products are the main sectors of China's ECE exports. The oil industry is the main industry of BRCs' VA exports. (3) From 2004 to 2017, China's bilateral trade with most of the BRCs exchanged net ECE for net VA. Compared with traditional trade, China is gradually losing net benefits in VA for reducing the net costs of ECE under GVC activities. (4) The embodied CO2 intensity (ECI) of China-BRCs bilateral trade is decreasing, and the ECI of China's exports to BRCs is 2.11 times of imports. The primary driver of a decline in ECI is the CO2 emissions coefficient. These findings demonstrate that the BRI has had a positive impact on the China-BRCs bilateral trade and GVC activities leading to cleaner exports from China and BRCs. The research comprehensive analysis framework of economic and carbon emissions of cross-border trade established in this study provides a methodological basis for subsequent studies of other environmental indicators.