Has China replaced colonial trade?

Abstract

China is often suspected of taking over the extraordinary trade relationships that former colonies had within colonial empires. We detail the three reasons why China's trade flows with former colonies could exhibit unexpected levels after independence. Besides potential preferential bilateral relationships built after independence, the two expected determinants of trade flows are China's export capacity and the natural redirection caused by the increase in country pairs trade costs due to independence. We investigate and quantify the three reasons explaining the level of former colonies' trade flows with China. Using sequentially naive graphical representations and structural gravity equations, we show that methodological issues can be largely responsible for displaying and estimating abnormaly high trade levels between former colonies and China. We show that increased trade between these pairs of countries is the result of coinciding unilateral factors on each side which raise trade with all partners, instead of being driven by more intense bilateral preferences. We then measure the reorientation of trade flows from former colonies' metropoles towards China and show that independence has produced the expected redistribution: trade flows would be 15% lower with China, had former colonies not become independent.

The Role of Cultural and Institutional Distances in International Trade

“…In contrast, DISTij (the geographical distance between China and its trading partner) and LANDLOCKEDj are negative. Our findings align with recent studies [18,[33][34][35][36][37][38][39][40], indicating that China exports more to countries with a higher GDP and countries sharing a common language. In contrast, China exports less to countries that are geographically distant and landlocked.…”