The Direct and Indirect Effects of the Belt and Road Initiative on Exports to China

ABSTRACT

This study investigates the direct effect of a country's participation in China's Belt and Road Initiative (BRI) on that country's exports to China, as well as the indirect effect of such participation on other countries' exports to China. Using panel data covering 187 countries from 2006 to 2023, we employ an event study approach, a staggered difference‐in‐differences (DID) methodology, and spatial econometric models in this research. The results show that participation in the BRI significantly increases member countries' exports to China, partly as a result of improvements in infrastructure. Turning to the indirect effect, we reveal that the BRI has a significantly negative effect on the exports of countries whose manufacturing share is similar to that of BRI members, likely reflecting increased competitive pressure as the BRI raises exports from members to China. These displaced exports are redirected to markets other than China, indicating a reallocation of trade flows rather than a contraction of trade. However, when we use a spatial weight matrix constructed based on geographic distance, we do not observe any significant indirect effect, thus suggesting that the positive effect of the BRI does not spill over to neighbouring countries through infrastructure development.