China's Belt and Road Initiative: Can Europe Expect Trade Gains?

Garcia-Herrero, Alicia & Xu, Jianwei, 2016. “China’s Belt and Road Initiative: Can Europe Expect Trade Gains?”, Working Paper Series, Issue 5, Bruegel Research Institute

HKUST IEMS Working Paper No. 2016-38

19 Pages Posted: 16 Dec 2016

See all articles by Alicia García-Herrero

Alicia García-Herrero

Bruegel; Hong Kong University of Science & Technology (HKUST) - HKUST Institute for Emerging Market Studies (IEMS); Natixis

Jianwei Xu

Beijing Normal University (BNU) - School of Economics and Business Administration

Multiple version iconThere are 3 versions of this paper

Date Written: December 1, 2016

Abstract

The Belt and Road Initiative, recently embarked on by China, aims to improve cross-border infrastructure in order to reduce transportation costs across a massive geographical area between China and Europe. We estimate how much trade might be created among Belt and Road countries as a consequence of the reduction in transportation costs (both railway and maritime) and find that European Union countries, especially landlocked countries, should benefit considerably. This is also true for Eastern Europe and Central Asia and, to a lesser extent, South-East Asia. In contrast, if China were to seek to establish a free trade area within the Belt and Road region, EU member states would benefit less, while Asia would benefit more. Xi Jinping’s current vision for the Belt and Road, centred on improving transport infrastructure, is very good news for Europe as far as trade creation is concerned.

Keywords: China, Belt & Road Initiative, infrastructure, international economic system

JEL Classification: F02, O19, O53

Suggested Citation

Garcia-Herrero, Alicia and Xu, Jianwei, China's Belt and Road Initiative: Can Europe Expect Trade Gains? (December 1, 2016). Garcia-Herrero, Alicia & Xu, Jianwei, 2016. “China’s Belt and Road Initiative: Can Europe Expect Trade Gains?”, Working Paper Series, Issue 5, Bruegel Research Institute, HKUST IEMS Working Paper No. 2016-38, Available at SSRN: https://ssrn.com/abstract=2886228 or http://dx.doi.org/10.2139/ssrn.2886228

Alicia Garcia-Herrero (Contact Author)

Bruegel ( email )

Rue de la Charité 33
B-1210 Brussels Belgium, 1210
Belgium

Hong Kong University of Science & Technology (HKUST) - HKUST Institute for Emerging Market Studies (IEMS) ( email )

IAS 2019, Lo Ka Chung Building,
Lee Shau Kee Campus, HKUST
Clear Water Bay, Kowloon
Hong Kong

Natixis ( email )

France

Jianwei Xu

Beijing Normal University (BNU) - School of Economics and Business Administration ( email )

No.19 Xinwai Str
Haidian District
Beijing, 100875
China

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