How Does the COVID-19 Pandemic Impact Internal Trade? Evidence from China’s Provincial-Level Data

Abstract

The COVID-19 pandemic has threatened the goals of sustainable development through its impact on global public health and economic systems. This paper examines the impact of the COVID-19 pandemic on interprovincial trade in China. First, we estimate interprovincial trade flows in China for 2018–2022 using information from different sources and use it to infer interprovincial trade costs. Second, we estimate the impact of COVID-19 on interprovincial trade flows and interprovincial trade costs based on a trade gravity model. Finally, we construct a multiregional, multisector quantitative spatial model and introduce changes in interprovincial trade barriers in 2019–2020 to the model to analyze economic losses due to the early COVID-19 pandemic. We find a significant negative effect from the COVID-19 pandemic on interprovincial trade flows in China, but we do not obtain robust results demonstrating that the intensification of the pandemic significantly affected bilateral trade costs. The results of the quantitative analysis suggest that changes in interprovincial trade barriers reduced China’s overall GDP in 2019–2020 by 0.11%. The results are not the same at the regional and sectoral levels, but the impact is not significant on average.