Abstract
In 2013, China announced the Belt and Road Initiative (BRI), which aims to promote the connectivity of Asia, Europe, and Africa and deepen mutually beneficial economic cooperation among member countries. Past studies have reported a positive impact of the BRI on trade between China and its partner countries along the Belt and Road (B&R). However, less is known about its effect on the sectoral trade between the B&R countries and countries that show little support of the BRI. To address that gap, this study examines the changing patterns of clothing imports by the United States (US) from China and 14 B&R countries in Asia. An extended gravity model with a policy variable BRI is built to explain bilateral clothing trade flow. A panel regression model and artificial neural network (ANN) are developed based on the data collected from 1998 to 2018 and applied to predict the trade pattern of 2019. The results show a positive effect of the BRI on the clothing exports of some Asian developing countries along the B&R to the US and demonstrate the superior predictive power of the ANN. More research is needed to examine the balance between economic growth and the social and environmental sustainability of developing countries and to apply more advanced machine learning algorithms to examine global trade flow under the BRI.
Highlights
Textiles and clothing industries have been driving the economic growth and development of low-income and developing countries like Bangladesh and Cambodia through improved trade, gross domestic product (GDP), employment, and foreign currency receipts [1]
The best model is identified when the artificial neural network (ANN) has 10 hidden neurons because it has attained the best prediction of out-of-sample clothing imports in 2019 with root mean squared error (RMSE) of 0.1824 (i.e., z-score on the transformed scale) or 2.29 billion USD
This study has expanded the empirical literature of global trade under the Belt and Road Initiative (BRI)
Summary
Textiles and clothing industries have been driving the economic growth and development of low-income and developing countries like Bangladesh and Cambodia through improved trade, gross domestic product (GDP), employment, and foreign currency receipts [1]. Worth noting is the roll-out of China’s Belt and Road Initiative (BRI) It is a development strategy proposed by China in 2013 that aims to promote the connectivity of Asia, Europe, and Africa and to deepen mutually beneficial economic cooperation among member countries [2]. Given China’s dominant role in the production and export of clothing products, major changes brought by the BRI will shape the sources of supply and patterns of global trade over time. Relocation of clothing factories from China to these countries could grow to take advantage of the relatively lower labor costs and improved infrastructure for trade facilitation. In this way, a win-win situation may be achieved.
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