Assessing the displacement effect of exports with gravity trade model: China’s textile and clothing case and OBOR implications
2016
This paper employs the gravity model to investigate how the growth of China’s
textile and clothing (T&C) exports is displacing the exports of other Asian
developing countries over the 1990-2015 period. Aggregate analyses were
undertaken, and the endogeneity of Chinese exports were accounted by applying
instrumental variables with country fixed effects. It was found that there was a
negative impact of China’s emergence on T&C exports from other Asian developing
countries. Further, we explored if the displacement effect varies across Asian
countries and the result showed that a more pronounced effect was found in
low-income than in high-income Asian countries. Therefore, the export
competitiveness of China’s neighbours, both more and less developed Asian
countries, are affected by the emergence of China in T&C Trade. The implications
for China’s One Belt, One Road initiative are also discussed
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