Abstract
This research implements the panel data control method to evaluate the stimulative effects of the “One Belt, One Road” initiative on trade performance in China. We constructed a counterfactual of China’s trade surplus by exploiting the unobservable common factors that create observable trade balances among other countries. We also modified the traditional control group selection by extending it to the Elastic-Net method. This study found the following: (i) China’s annual trade surplus increased sharply by 10.69% on average since 2015. In contrast, analysis of the counterfactual showed that the net exports of China would have remained constant without the stimulation of the “One Belt, One Road” initiative; (ii) These results are robust to exports growth rates and checking by various control group selections; (iii) Although the analysis shows return to an average trading balance, we should not underestimate the benefits of the initiative in the long run.
Highlights
China has formulated a new Silk-Road strategy, referred to the “One Belt, One Road” initiative, implemented under the Xi Jinping administration
This paper concludes by discussing the effects of OBOR on trade surplus and exports growth rate in the 2015q1–2018q1 period, with comments on export performance drawn from our empirical data analysis
The country has aroused national attention to the questions: (i) Can the OBOR initiative promote a new moderate trading balance. (ii) Are nations located in the OBOR region forming economic ties for mutual well-being? (iii) Has the initiative been welcomed by most countries worldwide?
Summary
China has formulated a new Silk-Road strategy, referred to the “One Belt, One Road” initiative, implemented under the Xi Jinping administration. The country has aroused national attention to the questions: (i) Can the OBOR initiative promote a new moderate trading balance. Using the trading performance of countries that not subject to OBOR partners, we estimate what would happen to China if the initiative hadn’t been implemented, and reflect on the country’s efforts to maintain a high level of trade. Based on our empirical analysis, our answers to the overheating trade debates are: (i) The OBOR initiative has a significant effect on trade promotion; (ii) The yearly trade surplus of China doubled to US$ 130 billion on average after three quarters of implementation effort; (iii) The OBOR initiative offers the opportunity to intensively tie up with the rest of the world, leading to future prosperity
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