China & World Economy / 84–99, Vol. 25, No. 6, 2017

China’s Belt and Road Initiative: Can Europe Expect Trade Gains?

Alicia Garcia Herrero, Jianwei Xu

Abstract

The Belt and Road Initiative (BRI) aims to improve cross-border infrastructure to reduce transportation costs across a massive geographical area between China and Europe. We estimate how much trade might be created among Belt and Road (B&R) countries as a consequence of the reduction in transportation costs (both railway and maritime) and find that European Union countries, especially landlocked countries, will benefit considerably. This is also true for Eastern Europe and Central Asia and, to a lesser extent, South-East Asia. In contrast, if China were to seek to establish a free trade area within the B&R region, EU member states would benefit less, while Asia would benefit more. Xi Jinping’s current vision for the B&R, centered on improving transport infrastructure, is advantageous for Europe as far as trade creation is concerned.

Key words: China, Belt and Road Initiative, infrastructure, international economic system
JEL codes: F02, O19, O53