Impacts of Belt and Road Initiative on China’s Foreign Trade Costs

Bilateral trade costs have become a chief barrier to global economic integration, with international trade growing enormously in the past few decades. However, Belt and Road Initiative (BRI) in full swing brings numerous opportunities and challenges to China’s international trade, which therefore has impacts on China’s trade costs. Using annual panel data of trade and economy from 1998 to 2016, this paper first measures the bilateral trade costs between China and 128 countries, and then analyzes the impacts of BRI on bilateral trade costs between China and B&R countries. B&R and non- B&R countries get the decreased trade costs together over time. Furthermore, B&R countries possess the smaller trade costs than non-B&R countries with China simultaneously, the bilateral trade costs between China and Southeast Asia are the smallest in B&R region. Strong negative impacts are obvious in the advance of BRI on bilateral trade costs between China and B&R countries, and the level of these impacts is more significant in 2014 than the rest years. Moreover, 21st-Century Maritime Silk Road countries reflect stronger impacts than The Silk Road Economic Belt countries on China’s bilateral trade costs.