Studies of International Finance, 2023, Issue 1

Authors: Lv Yue and Wang Mengyuan

Summary: In recent years, the development of global value chains (GVC) has faced greater challenges and obstacles. It is urgent to seek new growth impetus to deepen trade cooperation and achieve Chinese industrial upgrades in GVC. The Belt and Road Initiative (BRI) proposed by China in 2013 is an effort to strengthen economic integration with a major task of promoting trade cooperation. From the perspective of the global value chain, this paper investigates the effect of the Belt and Road Initiative on China's export domestic value added.

Based on bilateral trade data from the Asian development bank (ADB) for 35 sectors in 61 economies from 2007 to 2019,this paper investigates how BRI affects China's export domestic value added by using the DID model and explores its internal mechanism. Firstly, it is found that the BRI has a significant promoting effect on China's export domestic value added, and the conclusion is still stable after a series of robust tests. Secondly, the results of the mechanism analysis show that the BRI Initiative promotes domestic value added of China's exports mainly by reducing trade costs and attracting foreign investment.Thirdly, this paper further examines the impact of BRI on China's export domestic value added in different sectors. It is found that the promotion effect is not concentrated in priority sectors such as infrastructure construction, which contributes to the growth of export domestic value added in various sectors. Fourthly, the BRI also promotes the creation of domestic value added exports from countries along the route, which is consistent with the vision of the BRI to build a community of shared future for humankind and promote inclusive growth in all participating countries.

This paper provides a new research perspective for comprehensively evaluating the economic effects of the Belt and Road Initiative. The conclusions of this paper not only help improve the domestic value added of China's export, but also provide useful enlightenment for steadily promoting the modernization level of the industrial supply chain and constructing a mutually beneficial supply chain cooperation system.

Key words: Export Domestic Value-Added; Differences-in-Differences Model; “The Belt and Road” Initiative