Recent Developments in Trade, Investment and Finance of China’s Belt and Road

HKUST IEMS Working Papers No. 2018-50

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This paper makes a mid-term assessment for China’s Belt and Road Initiative (BRI) from the perspective of trade, investment and finance, respectively. We will discuss the economic progress of the Belt and Road Initiative from the trade, investment and financial perspectives, respectively. Trade is most accessible field for China to breakthrough as it can be instantly affected by short-term policies such as removing tariff or non-tariff barriers. Our findings also confirm the rapid progress in trade, though the development was not equally distributed in the area, with the ASEAN, Middle East, South Asia and Russia constitute the largest trade share with China. Our analysis on the BRI’s spillover effect on the US and the EU reveals that the BRI plan poses actually very little substitution effect but under some scenarios even positive impact on the EU-China trade. We especially assess the impacts on the EU, which sits at the other end of the BRI area, and find that better connectedness within the BRI area will bring higher economic benefits to the EU than free trade agreements.

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