The influence of cultural exchange on international trade: an empirical test of Confucius Institutes based on China and the ‘Belt and Road’ areas

Abstract

With the implementation of the Belt and Road initiative, the development of trade governance between China and countries along the line has expanded. Firstly, this paper analyzes the impact of cultural exchanges through Confucius Institutes on regional trade cooperation from three dimensions: improving cultural identity, reducing trade costs and sharing information. Secondly, we utilise data trade data from the 64 countries along the line from 2004 to 2015 to examine the effects of Confucius Institutes in regional trade cooperation with China. Overall, we found that Confucius Institutes have significantly promoted the trade growth of China and those countries. Compared to exports, Confucius Institutes promote greater growth imports to the Belt and Road countries from China. Compared to countries in the Road, Confucius Institutes better promoted trade growth between China and countries in the Belt. This empirical conclusion stands under various robustness tests. Forth, after the 12th five-year-plan, the promoting effects of the Confucius Institute has been strengthening. Fifth, the smaller the cultural distance, the stronger the promoting effects of the Confucius Institute on the trade in BRI countries. However, the effect of language similarity is not significant. This study indicates that the Chinese government should pay more attention to the economic effects of cultural factors, such as the Confucius Institute, in policy design.