Impact Of Bilateral Political Relations On China’s Export Trade To RCEP Member Countries

Since the Global Financial Crisis(GFC),the economic and trade growth of major economies in the world has slowed down,anti-globalization thoughts and trade protectionist forces have gradually been emerging,and the world has undergone major changes unseen in a century.The Sino-US trade friction and the sudden COVID-19 pandemic have impacted China and the world economy,accelerating the evolution of major changes.In this context,China and 14 other Asia-Pacific countries have signed a free trade agreement with the largest population,economy,and export scale in the world:the Regional Comprehensive Economic Partnership Agreement(RCEP).The signing of the RCEP agreement means that East Asia,which has a mature production network and close intra-regional trade,has reached an overall economic cooperation system arrangement for the first time.It also means that China and its major trading partners have reached a unified free trade agreement arrangement,which will contribute to the development of China’s foreign trade.And stability is of great significance.After entering the 21st century,political interactions between China and these countries have become more frequent,exchanges and cooperation from the government to the private sector have become closer,small-scale frictions and disputes have occurred from time to time,and economic and trade cooperation relations have become complicated.In the context of political and economic interaction,the influence of bilateral political relations on trade between China and its member states as well as the extent,channels and the dynamic characteristics have attracted more and more attention from researchers in international trade.Compared with existing research,the possible marginal innovations of this study are as follows:First,the topic selection perspective is innovative.Differing from the various tariff and non-tariff trade barriers that the existing research focuses on,this article uses an empirical analysis method to assess the impact of bilateral political relations on China’s export trade to RCEP member countries from the perspective of international relations and to advance the understanding of China’s dynamic trade relationship with other member countries.Second,it has research content innovation.This article not only analyzes the impact of undirected political relations on China’s export trade to RCEP member countries,but also evaluates the asymmetric impact of different types of political relations on export trade and the dynamic characteristics of the impact.It also examines the institutional.environment and bilateral role of channels and mechanisms for diplomatic visits and people-to-people exchanges.Third,it has method application innovation.This article not only constructs a rich index system of high-frequency monthly political relations,directional political relations,non-commercial and non-trade political relations,cooperative relations and conflict relations between China and RCEP members,but also uses the system GMM,instrumental variables,panel VAR models and other methods to investigate their impacts on trade and to address the potential endogenous problems between bilateral political relations and trade exchanges.However,due to data limitations this study can not use more disaggregated firm-level transaction data to explore the heterogeneous characteristics of the trade effects of bilateral political relations.It also did not use the quasi-natural experiments and other methods to make more detailed causal inferences.These limitations will be addressed in the follow-up research.In general,the main research work and conclusions of this thesis are as follows:1.The historical evolution of bilateral political relations between China and RCEP member statesFirst,according to the official rhetoric of the Ministry of Foreign Affairs of China,we reviewed comprehenisvely the historical evolution and characteristics of political relations between China and its member states in stages,and then introduced the databases and indicators used to quantify political relations.We also conducted a qualitative analysis of the current trends and spatial distribution characteristics of the political relations between China and other RCEP member states.The research results show that:(1)From the perspective of the historical evolution of the political relations between China and RCEP member states,after decades of joint efforts,the bilateral political relations between China,Japan,South Korea,Australia,New Zealand,and ASEAN countries have continuously moved to a new stage,and the two sides have political mutual trust.Significantly strengthened and fruitful results have been achieved in practical cooperation in various fields.At the same time,during the observation period,the Japanese Prime Minister’s visit to the Yasukuni Shrine,the Sino-Japanese Diaoyu Island conflict,the South China Sea dispute,and THAAD’s entry into Korea and other important events have caused political relations between China and its member states for months or even decades,and generetd serious consequnce.(2)From the perspective of time trends,among the various events that China interacts with RCEP member states,cooperation events have always been the main theme of bilateral exchanges,especially the actual cooperation between countries after the financial crisis has rapidly increased.Judging from the voting in the United Nations General Assembly,the foreign policy consistency of RCEP member states is relatively weak,and the spatial distribution shows the "polarization"characteristics of developed countries and developing countries.2.The status of bilateral trade between China and RCEP member countriesBased on the foreign economic and trade profile of RCEP countries,the bilateral trade situation between China and member countries is analyzed from the perspectives of trade scale,trade proportion and trade structure.The analysis focuses on the bilateral trade relationship between China and RCEP member countries using measures related to trade competitiveness,complementarity,and intra-industry trade level.The research results show that:(1)In the absence of a formal institutional framework,East Asian integration was not begun with any formal trade liberalization agreement,rather driven by market forces.The fragmentation of free trade agreements and the spaghetti bowl effect have hindered the deepening of East Asian regional economic cooperation.With the development of East Asian production networks and China’s accession to the WTO and its deep integration into the global value chain,RCEP countries with export-oriented characteristics have further increased their influence on the global economy and trade.In this context,the signing of RCEP is of great importance to the development of the world economy and regional economic cooperation in East Asia.(2)In recent years,the scale of foreign trade between China and other RCEP member countries has continued to grow,and currently accounts for nearly 30%of China’s total foreign trade.China has a relatively close trade dependence relationship with the other member states,and the RCEP agreement will contribute to the development and stability of China’s foreign trade.From the perspective of trade structure,China mainly exports intermediate goods and consumer goods to member states and imports intermediate goods from member states.Industrial products are the main category of trade between China and member states.This trade structure reflects China’s position as a production and processing center in the East Asian production network,and close industrial chain cooperation allows all parties to benefit from it.In terms of comprehensive trade competitiveness,complementarity and the level of intra-industry trade,China and the other member states of RCEP have great potential to expand trade.3.The influence and mechanism of bilateral political relations on China’s export trade to RCEP member countriesFirst,we construct an econometric model based on the extended gravity model;then we use the country-industry-time panel data to study the influence of political relations on export trade;finally,from the perspectives of the institutional environment,diplomatic visits,and non-governmental exchanges,we incoporrate the moderating effect and the intermediary effect in our models to study the trade effect mechanism of changes in bilateral political relations.The empirical results show that:(1)Bilateral political relations are an important factor in the export trade between China and RCEP member states.The improvement of political relations significantly promotes the scale of China’s exports,otherwise hinders the expansion of China’s export scale.Changes in bilateral political relations mainly affect the total margin of China’s exports to RCEP member states by deepening existing trade categories.Benefiting from the fact that China and RCEP member countries are in the same East Asian production network and have close industrial chain and supply chain cooperation,changes in political relations will not have a significant impact on the diversification of China’s exports to other RCEP member countries.(2)From the perspective of the influence mechanism,on the one hand,the export effect from the political relationship changes between China and RCEP member states has an obvious moderating effect due to the differences in the quality of the political and economic systems of the member states.The institutional quality of the member states and the bilateral political relations are substitutes for each other.The higher political and economic institutional quality will inhibit the promoting effect of the bilateral political relations on the scale of China’s export trade to RCEP member states.On the other hand,the warming of political relations between China and other RCEP member states will help change the preference of RCEP member states for China’s products by facilitating diplomatic visits and strengthening interpersonal communication,and promote the expansion of China’s export trade to RCEP member states.4.The asymmetric impact and dynamic characteristics of various bilateral political relations on China’s export trade to RCEP member countriesFirst,based on the monthly cross-country panel data,this study further researches the asymmetric impact of different types of political relationship changes on China’s exports to member states by using the panel VAR model to capture the dynamics of the impact of changes in bilateral political relations on export trade from the perspectives of hysteresis and persistence.The empirical results show that:(1)The improvement of bilateral political relations can have a favorite effect on China’s exports to other RCEP member countries in the same month,and this positive effect can last for at least 3 months.But in the long run,political relations will not have much impact on China’s exports,that is,persistency is short lived and there is no memory.(2)Distinguish bilateral cooperation and conflict relations,RCEP member states’ attitude to China and Its counterpart.The regression results show that,on the one hand,the improvement of cooperative relations between countries will help promote China’s overall exports to RCEP member states.While the conflicting relationship has a weak "holding" effect on trade and there is a lag of about two months;on the other hand,an improvement of the "RCEP member → China" political relationship has a more prolonged positive effect on China’s exports to RCEP member countries.(3)From the perspective of the degree of contribution of different types of political relationship variables to the changes in China’s exports,the "RCEP member country→China" political relationship has a greater impact on China’s exports to RCEP member countries,and the cooperative relationship have a greater impact on China’s exports than its counterparts.Based on the above findingds,this study puts forward the following policy recommendations in a targeted manner:The Chinese government should continue to promote bilateral friendly and cooperative relations with other RCEP member states,strengthen channels from the government to the private sector,and be good at using media to tell Chinese stories to gradually enhance their mutual understating of cultural similarity and difference.In the face of changes in bilateral political relations,especially the escalation of hostile conflicts,attention should be paid to improving the service capabilities of China Council for the Promotion of International Trade and other non-governmental organizations for various industries and export companies.It would dbe advisable for the government to make good use of the provisions of the RCEP agreement to bridge the gaps in economic development,technological level,and institutional quality among the member states,and to consolidate East Asian production network cooperation by reducing the costs of intermediate trade.The Chinese government should participate in global governance through various forms,take the initiative to assume the responsibilities of a major country,share the benefits of openness and development,and actively build a community with a shared future in the Asia-Pacific region.