Partnership Diplomacy and China’s Exports

Abstract

The use of active diplomacy tactics could explain the rapid growth of China’s trade. By collecting information from the official statements on China’s Ministry of Foreign Affairs website, we constructed a dataset of China’s partnerships to investigate whether partnership diplomacy influenced China’s exports during the period of 1995–2018. We found empirical evidence that partnership diplomacy had a significant and positive impact on China’s exports. The lag terms of the partnerships and the voting data from the United Nations General Assembly have been used as instruments to reduce potential endogeneity. Our mechanism analysis showed that the positive effect of partnership diplomacy on China’s exports followed the law of comparative advantage. By reducing bilateral trade costs, partnership diplomacy has mainly fostered exports in products and industries for which China is more productive and competitive, such as “machinery and electrical equipment” and “textile and articles thereof”. Partnership diplomacy is believed to bridge the ideological gaps between partner countries and enable them to pursue common interests. In light of this, partnership diplomacy could be regarded as a positive factor that has driven China’s export expansion.