Economic Integration and Trade Flows of China

Abstract

Purpose: This paper examines the impact of trade agreements and trade flows on China with its member and non-member countries. Particularly, this paper examines whether these trade agreements have trade creation or trade diversion. Moreover, this paper has also estimated trade creation and trade diversion for overall imports and exports along with commodity-group level imports and exports. Design/Methodology/Approach: We have applied the gravity model on the data of imports and exports of China starting from 1988 to 2020. Findings: We established that China has strong improvements in trade among member nations by lowering the trade with non-member nations. The empirical findings also indicated the foundation of bilateral trade agreement between China and its trading partner produces trade with member nations as well as with non-member nations.

Keywords

• Gravity Model
• Panel Data
• Economic Integration
• Trade Creation and Trade Diversion