Impact of China-Pakistan Economic Corridor (CPEC) on Pakistan's trade: Empirical Evidence from Gravity Model

Abstract

Purpose: The China-Pakistan Economic Corridor(CPEC) is an enormous project for both economies. There are much potential remunerations for concerning frugalities in trade and industries of both countries. The study was specifically designed to examine the influence of CPEC on fruits export of Pakistan. The bilateral or regional trade was examined through Gravity approach. Data was taken from 2013 to 2015. Since distance plays a vital role in trade, the outcomes of gravity model are estimated with ordinary least square method. Pakistan China Economic Corridor is a mega project for both economies. It will make Pakistan and China, the major economic players in the region and further enhance economic conditions of both countries. Some of the basic determinations of Pak-China economic corridor are to boost business opportunities, efficient transport routes and expanding regional trade. The export target of Pakistan was $ US 20 billion in 2013-2015. As of April 2015, Pakistan exports stand at $ US 6,178 billion. Pakistan’s exports to Asia was amounted to $ US 1,649 billion which was 42 percent of its overall exports and the share of fruit and nuts markets in Pakistan's export was $ US 1,017 billion. The paper analyses the CPEC's impact on exports especially exports from fruit market of Pakistan using Gravity Approach for the evaluation of this bilateral trade. The results show that CPEC reduces the distance and it will be more beneficial for perishable goods trade like fruits.