China Belt and Road Initiative: Measuring the impact of improving transport connectivity on international trade
Thatree Thitivongvaroon/Getty Images
China's Belt and Road Initiative (BRI) is an effort to create jointly-built trade routes that emulate the ancient Silk Road and promote regional cooperation in Asia, Europe, and Africa.
Researchers measured the impact that improving multimodal transport connectivity might have on multilateral trade and economic growth in countries and regions across the BRI. They found that multimodal transport infrastructure and connectivity can facilitate trade expansion, attract foreign direct investment, speed up the industrialisation process, facilitate regional integration, and accelerate the process of economic growth. Additionally, having a rail connection between trading partners has the largest impact on improving trade in the BRI region.
In 2013, Chinese president Xi Jinping announced plans to build a Silk Road economic belt and a 21st century maritime Silk Road, now known as the Belt and Road Initiative (BRI). The BRI is geared towards encouraging greater policy coordination, infrastructure connectivity, investment and trade cooperation, financial integration, cultural exchange and regional cooperation between Asia, Europe and Africa, by creating jointly-built trade routes emulating the ancient Silk Road. The BRI will encompass more than 70 per cent of the world’s population (4.4 billion) and 62 per cent of the world’s GDP (around US$21 trillion) illustrating the colossal scale of the initiative.
The project aimed to gather evidence to understand and quantify the potential impact of the BRI investment on multilateral trade and economic growth.
The primary research question was: what is the impact of improving multimodal transport connectivity on multilateral trade and economic growth in countries and regions across the BRI?
This is a proof-of-concept study which aims to stimulate discussion and provide empirical evidence on the impact of transport infrastructure improvements in the BRI region. The study’s findings hope to be of use to policymakers and stakeholders who are interested in this infrastructure plan.
The research team undertook both qualitative and quantitative analyses consisting of literature review, desk research and econometric modelling.
The literature review concludes:
- Multimodal transport infrastructure and connectivity can facilitate trade expansion, attract foreign direct investment, speed up the industrialisation process, facilitate regional integration, and accelerate the process of economic growth.
- A number of factors can either facilitate or act as barriers to transport connectivity and multilateral trade in the general BRI context, such as physical topographical factors and legal and regulatory barriers. Many barriers could become facilitators, if resolved.
Our econometric model reveals:
- Transport infrastructure and connectivity is generally lower in the BRI region compared to the other regions (EU and elsewhere).
- There is a positive and statistically significant relationship between transport infrastructure and connectivity and bilateral trade.
- In the BRI region, having a rail connection between trading partners has the largest impact on improving trade (improving total exports by 2.8 per cent in the study area). This is followed by improvements in road density and transport service quality.
- Assuming that this relationship is causal, with the proposed level of investment in transport infrastructure in the BRI region, total trade volumes increase not only in the BRI region, but also in the countries outside the initiative (such as those in the EU). Therefore it appears to be a win-win scenario.
The BRI region suffers from less developed infrastructure than other regions and this can hamper trade development. Therefore, investing in infrastructure related to trade and transport, such as ports, airports, road, and rail links and connections, should remain a priority and sufficient funding should be made available for this purpose.There could be substantial further benefits if countries and regions along the BRI region coordinate their development plans to achieve compatibility between their policies and the infrastructure implementation. Countries should work together to ensure that the initiative delivers sustained economic, social and environmental benefits across generations.