Chinese Port Investments and Their Affects on Bilateral Trade

Abstract: Although the Belt and Road Initiative (BRI) was announced by the
People’s Republic of China in 2013, its foundation has been under development
for over 15 years. The Go Out Policy, officially introduced in 1999, paved the
way for relationships that would later become the BRI. The initiative has two
primary components: the Silk Road Economic Belt (SREB) and the 21st Century
Maritime Silk Road (MSR). We examine completed port projects and an
extended MSR, composed of all ports that are owned or operated by Chinese
firms, to determine the effect of these institutional arrangements using a
structural gravity model. Although both port contracts and completed port
projects have a recognizable influence on bilateral trade with China, the
agreements do not have the same persistent effects on trade flows. We find
that the operation of foreign port terminals by Chinese SAEs modifies trade for
host countries towards China, such that trade is diverted away from alternative
trade partners. Continue Reading