Impact of the Belt and Road Initiative on Global Trade and Economic Growth Amid China’s Slowing Growth

Abstract

Since the inception of the Belt and Road Initiative (BRI), China’s trade relations with participating nations have experienced substantial growth. This study utilises data from the World Trade Organization (WTO) covering the years 2003 to 2021 to explore the dynamics of China’s foreign trade and assess the impact of the BRI on trade interactions with China. One of the central objectives of our research is to determine whether participation in the BRI has significantly contributed to trade growth with China, thereby strengthening economic ties and fostering bilateral cooperation. Another important objective is to analyse the changes in the BRI’s role in driving global economic growth amid China’s slowing growth. Through empirical analysis using data from over 180 countries, we evaluate the heterogeneous effects of the BRI across different continents. Our findings indicate that the BRI has had the most pronounced trade-stimulating impact on the continents of America, Europe and Africa, while trade volumes with Asian countries have seen only marginal increases. The relatively smaller trade growth in Asian countries can be attributed to the already high volume of trade activities due to their geographical proximity to China, which diminishes the marginal impact of the BRI. Additionally, the significant infrastructure investments under the BRI have been predominantly directed towards Africa and Europe, further explaining the smaller trade-enhancing effects observed in Asia compared to other continents. Furthermore, we identified the spillover effects of the BRI on non-participating countries. Moreover, significant differences in the BRI’s impact on global economic growth were observed before and after China’s economic slowdown. This article offers actionable policy recommendations to inform future decisions based on these findings.