Evaluation of China-ASEAN trade status and trade potential: An empirical study based on a gravity model

Abstract

Objective The objective of this study was to identify factors influencing the development of China-ASEAN trade- from the total economic volume of both sides, distance, the population size of ASEAN countries, the construction of a free trade area, and the signing of the Belt and Road initiative, resource endowment per capita, the exchange rate between RMB and ASEAN countries, and the land area of ASEAN countries—to develop a conceptual framework for China-ASEAN trade potential. Study design This study uses panel data from 2001 to 2021 that is evenly distributed among 10 ASEAN countries to serve as the dataset. Firstly, the unit roots are checked and the cointegration relationships are examined, focusing on the heterogeneity test. Based on the classical trade gravity model, the innovative trade gravity model with key influencing factors is constructed. On the basis of the classical trade gravity model, an innovative trade gravity model of key influencing factors is constructed. The trade potential model is used to calculate the direct trade potential coefficient between China and ASEAN countries, which points out the direction for the sustainability of bilateral trade. Results This study finds that among the factors affecting China-ASEAN bilateral trade, the total economic output of both sides, distance, population size of ASEAN countries, the construction of the FTA, and the signing of the Belt and Road Initiative all have a positive impact on bilateral trade. Three influencing factors, namely per capita resource endowment, exchange rate between RMB and ASEAN countries, and the size of ASEAN countries, have a negative impact on bilateral trade, but to a lesser extent. The trade potential between China and Vietnam falls into the category of potential re-modelling, indicating that both sides are currently utilizing their trade potential to the greatest extent possible, that trade growth space is limited, and that new trade opportunities must be discovered. The trade potential index between China and nine ASEAN countries, excluding Vietnam, is in the potential-exploiting category, indicating that the potential has not been fully utilized by both sides and that there is still room for growth in the scale of trade between the two countries. Conclusion With the shift of the world’s economic center of gravity in the direction of Asia following COVID-19, China and ASEAN countries should seize the opportunity to strengthen their comprehensive strength and economic aggregates and further develop China’s constructive role in the regional organization. The signing of the Belt and Road Initiative and the construction of a free trade zone has had a positive effect on the development of bilateral trade. Propose that: positive trade factors should continue to be strengthened, trade barriers should be removed, and new dynamics of bilateral trade growth should be enhanced.