Abstract

In an interconnected and rapidly evolving global economy, the dynamic forces of international trade have become a pivotal driver of economic growth and prosperity. Against this milieu, China started Belt and Road initiatives emerged as a transformative force reshaping the landscape of international trade and connectivity. This study investigates the determinants of China-Asia trade under the background of the Belt and Road Initiative (BRI). We use Gravity model of trade to analyze the determinants of China-Asia trade. Trade variable is captured by three alternative proxies such as trade, exports and imports. The sample countries of this study include: India, Laos, Nepal, Pakistan, Sri Lanka, Afghanistan and Maldives. We use Generalized Method of Moments (GMM) and instrumental variables Two Stage Least Square (2SLS) methods to estimate the gravity model of trade for China. The results show that economic growth in China and Asia, distance between China and Asian countries and improvement of industrialization in Asia has positive effects on China-Asia trade. While the development gap between China and selected Asian countries, China’s investment to Asian country and Savings rate of Asian country has negative effects on China- Asia trade. Policy recommendations are provided at the end of the study.