Assessing infrastructure and trade connectivity through network analysis evidence from BRI countries

ABSTRACT

The Belt and Road Initiative (BRI) is the world’s largest infrastructure investment that aims to improve economic integration and connectivity throughout Asia, Europe, and Africa. This paper investigates the influence of infrastructure development on trade connectivity in BRI countries. This paper employs network analysis to visualize and quantify the trade connectivity among BRI countries in 2013 and 2020 using the World Integrated Trade Solution (WITS) data. The study then empirically examines the impact of infrastructure development on trade connectivity from 1990 to 2020 for 76 BRI countries using a dynamic estimator. The dynamic model demonstrates how infrastructure investment can bolster trade connectivity. The results of the network analysis indicate that trade connectivity has significantly improved within BRI countries, in Asia and Europe while it lags behind in African and Central Asian regions.We suggest that that China should channel additional resources toward enhancing the connectivity of African and Central Asian nations.

KEYWORDS:

• Belt-Road Initiative (BRI)
• China
• network analysis
• dynamic estimation
• connectivity

JEL CLASSIFICATION:

• C45
• F13
• F15
• O53

Acknowledgments

We would like to thank the participants of the 9^th Conference on Asia and Pacific Economies in May 2022 for many helpful comments.

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

1. See Gould et al. (2018) for Europe and Central Asia; Eun, et al. (2019) for Vietnam; World Bank (2020) for Mongolia; Chan (2017) and Shepherd and Archanskaia (2014) for East Asia and the Pacific.

2. ‘Belt and Road Initiative,’ World Bank, March 29, 2018, https://www.worldbank.org/en/topic/regional-integration/brief/belt-and-road-initiative

3. ‘Belt & Road: Opportunity and Risk, The Prospects of Building China’s New Silk Road,’ Baker McKenzie, 2017, https://www.bakermckenzie.com/-/media/files/insight/publications/2017/10/belt-road/baker_mckenzie_belt_road_report_2017.pdf?la=en

4. ‘Belt and Road Portal’ yidaiyilu.gov.cn, https://www.yidaiyilu.gov.cn/xwzx/roll/77298.htm

5. Refer to Vision and Actions on Jointly Building Silk Road Economic Belt and 21^st-Century Maritime Silk Road published by the National Development and Reform Commission, Ministry of Foreign Affairs, Ministry of Commerce of the People’s Republic of China with State Council Authorization (2015).

6. See a recent paper by Altin and Yalcinkaya (2023) using RCEP sample of countries.

7. Bilateral trade is recorded in nominal US dollars by WITS. The export value recorded in fob (free on board). Some observations are recorded as a zero and others are missing.

8. The latest available dataset in WITS for the bilateral trade flows is 2020.

9. Nodes are the countries. Hubs refer to the countries that are most connected.

10. Readers may refer to Acemoglu et al. (2012), Bonacich (2007); De Soyres, et al. (2019, 2020), Freeman (1977); Gomes (2019); Iapadre, et al. (2014), Ruhnau (2000) and Wei et al. (2017) for more explanation, technical aspects and importance of these measures in the network analysis.

11. Portugal-Perez and Wilson (2008), Francois and Manchin (2013), Alvarez, Barbero, Rodriguez-Pose.

12. See Workman (2023): Top African Export Countries.

13. While both Degree Centrality and Eigenvector Centrality provide insights into the centrality of countries within a network, their rankings can differ due to their different considerations of connectivity and influence within the network (De Benedictis et al. 2014).

14. The World Bank (2023) indicated Vietnam to be one of the fastest emerging markets in Asia.

15. Several factors may have contributed to this drop. Kazakhstan experienced a slowing down of economic growth since 2014. Falling oil prices also lead to a large terms-of-trade shock for the country. Finally, the move to a floating exchange rate regime in August 2015 led to a steep depreciation of the Kazakhstani tenge (KZT).