December 2018 · Number 6 How Old is the Belt and Road Initiative? Long Term Patterns of Chinese Exports to BRI Economies Cristina Constantinescu and Michele Ruta countries in East Asia and Pacific grew by 30 percent during period 2011-2013, the export share to South Asia increased by 40 percent The Belt and Road Initiative (BRI) has recently since 2013 (reflecting the doubling in Pakistan’s turned five. But has it really? We find that share) and the one to core BRI countries in China’s exports, particularly of infrastructure Europe and Central Asia more than related goods, had already started flowing to quadrupled from 2001 to 2007 (Kazakhstan’s BRI countries for a decade before the official share increased five times during that period). launch of the Initiative. The 2013 In Sub-Saharan Africa, the share of Kenya more announcement of the BRI was not a dramatic than tripled between 2003 and 2013. shift, but it brought new energy and focus to ongoing trends in China’s trade relations. Finally, the data point out that Chinese exports of infrastructure-related goods to several BRI Introduction countries such as Vietnam, Pakistan, Lao PDR and Kenya, gained momentum around 2013. In In this note, we look at trade data to answer a short, we find that the formal announcement of simple question: When did the Belt and Road the Belt and Road Initiative gave further Initiative (BRI) really start? The BRI was strength to a trend already in the making. officially announced in 2013 during President Xi Jinping’s visits to Kazakhstan and China’s Exports of Infrastructure-Related Indonesia, which took place in September and Goods to BRI and Non-BRI Economies October of that year, respectively. By then, however, the pattern of Chinese exports had The Belt and Road Initiative aims at improving already seen significant changes. Trade data regional cooperation and connectivity on a indicate that the group of BRI countries had trans-continental scale. The Initiative consists already seen more than a decade of steady rise primarily of new and improved transport in importance as a destination for Chinese infrastructure on what have been called the Silk exports. This growth is evident when we focus Road Economic Belt, with six economic on infrastructure-related goods and on the set corridors being identified on land, and the of countries where BRI infrastructure projects New Maritime Silk Road (see Figure 1). While are being built or planned. no official list of countries exists, for this note we focus on 71 economies located along the The data also show that over 50 percent of Belt and Road. Based on data on transport Chinese exports of infrastructure-related goods infrastructure projects (Reed and Trubetskoy, to the BRI group are directed to East Asia and 2018), we also identify a set of “core” BRI Pacific countries, but that the shares to other countries - i.e. countries that lie along the land BRI economies have been more dynamic at and maritime routes identified by China and times. Thus, while the share to core BRI Figure 1: BRI and “core” BRI economies Notes: The core BRI countries are indicated in dark grey. Other BRI countries are in blue. See Table A1 for lists of countries by region. where major transport infrastructures are about 40 percent of China’s overall being built or planned.1 merchandise exports in 2017, having gained almost 9 percentage points since 2001. We first analyze China’ exports to BRI and non- Zooming in on the three categories of goods of BRI countries by type of exports.2 Specifically, focus within merchandise, as done in the other Figure 2 plots the shares of BRI countries and three panels of Figure 2, shows the importance non-BRI countries in China’s exports, during of China’s exports of infrastructure-related period 2001-2017, for four types of goods, goods to BRI economies. Specifically, we find including overall merchandise goods exports, that: capital goods, infrastructure-related goods, as • The gain in the share of BRI countries well as a key component of the latter, namely in China’s capital goods exports from iron and steel.3 2001 to 2017 amounted to just 4- percentage points, i.e. less than half We find that the rise in BRI’s share is apparent the gain for merchandise goods. This for all four groups analyzed, that it precedes is likely to reflect the enduring 2013, and that it is steeper for infrastructure- position of OECD markets as related goods. Based on the first panel of Figure destinations for this type of Chinese 2, BRI countries accounted collectively for exports (within which, goods like 1 The 71 BRI countries and the 25 “core” BRI more limited, focusing on exports of infrastructure- countries, classified by region, are listed in Table related goods. A1. 3 Infrastructure-related goods - defined here based 2 Other studies had looked in detail at the trade on the SITC Rev. 3 classification - account for relationship between China and BRI economies approximately 14 percent of China’s exports in 2017 (Bastos, 2018; Boffa, 2018), the scope of this note is (see table A2). About one-third of these goods are represented by capital goods. December 2018 · Number 6 · 2 telephones and computers account for respectively in 2017. Core BRI a large portion).4 countries had already gained 15 and 17 percentage points in these • The gains in the share of BRI countries respective shares by 2013. in China’s exports of infrastructure- related goods and iron and steel These findings support the notion that exceeded the ones for merchandise Chinese construction activity in BRI countries goods, amounting to 11 and 16 had started well before the BRI percentage points, respectively. As the announcement, and they also corroborate third and fourth panels of Figure 2 evidence in Chen and Lin (2018) that BRI indicate, this trend is clearly countries were accounting for a larger share of associated with core BRI countries, Chinese construction investment than non-BRI which accounted for 27 and 37 percent countries even before 2013. of China’s exports of infrastructure- related goods and iron and steel Figure 2. Share of BRI and non BRI countries in China’s exports, by type of goods, 2001 -2017 All merchandise goods Capital goods percent percent 80 80 70 70 60 60 50 50 40 40 30 30 20 20 10 10 0 0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Infrastructure-related goods Iron and steel percent percent 80 80 70 70 60 60 50 50 40 40 30 30 20 20 10 10 0 0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 BRI core BRI other BRI non BRI Sources: UN Comtrade (WITS) and authors’ calculations. Notes: The vertical line denotes the year when BRI was announced. Iron and steel refer to SITC Rev. 3 code 67. Products included in the infrastructure-related aggregate are listed in Table A2. 4For example, in 2017, OECD absorbed 65.6 percent percentage points higher. These three products are: of the exports of three 6-digit products that 851712 (telephones for cellular networks), 847130 accounted for almost 30 percent of China’s exports (portable automatic data processing machines) and of capital goods in that year. Ten years earlier, the 851762 (machines for the reception, conversion & share had been 66.9 percent, i.e. less than 1.5 transmission). December 2018 · Number 6 · 3 Given the trend identified above for Moreover, between 2003 and 2008 (i.e. up until infrastructure-related goods, we next look at the crisis), the share of infrastructure-related whether BRI countries’ imports from China goods in Chinese exports to core BRI countries have become more intensive in such products had grown significantly faster than the relative to other merchandise. More corresponding shares for overall BRI and non- specifically, we examine the share of BRI countries. After declining during the infrastructure-related goods and its period of the Global Financial Crisis, the share component, iron and steel, in China’s overall for core BRI countries remained on average merchandise exports to a destination. We find about 6 percentage points higher than the share that core BRI countries tend to be more for non-BRI, while the difference between the intensive in infrastructure-related goods in shares for BRI and non-BRI slightly grew over their imports from China. Since the BRI time. A focus on Chinese shares of exports of announcement, the gap between the iron and steel confirms these insights (Figure 3, intensiveness for BRI countries and that for right panel). The data support the finding on non-BRI countries has started to widen. the early start date of the BRI and the focus of the initiative on core BRI economies. Figure 3. Share of infrastructure-related goods in China’s exports of merchandise, by destination, 2001 -2017 Infrastructure - related goods Iron and steel percent BRI BRI_core non BRI percent BRI BRI_core non BRI 24 8 22 7 20 6 18 5 16 4 14 3 12 2 10 1 8 0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Sources: UN Comtrade (WITS) and authors’ calculations. Notes: Iron and steel refers to SITC Rev. 3 code 67. Products included in the infrastructure-related aggregate are listed in Table A2. A Closer Look at Chinese Infrastructure- countries represented 27 percent of China’s Related Exports to Core BRI Countries exports of infrastructure-related goods. Core BRI countries in East Asia and Pacific We also unpack core BRI countries to see where accounted for 56 percent of this number, as the Chinese exports of infrastructure-related their share in China’s exports was 15 percent. goods have concentrated over time. Of all core All other regions followed at significant BRI countries, those in East Asia and Pacific distance, the runner up being the group of core account collectively for the largest share in countries in South Asia with a 5.7 percent share China’s exports of infrastructure-related goods in China’s exports of infrastructure-related to BRI countries, at any point in time during the goods. Looking at iron and steel exports reveals period of focus (Figure 4). In 2017, core BRI similar trends. December 2018 · Number 6 · 4 Figure 4. Share of core BRI countries in China’s exports of infrastructure-related goods, by region, 2001-2017 percent Infrastructure - related goods percent Iron and steel 20 25 20 15 15 10 10 5 5 0 0 2001 2003 2005 2006 2008 2011 2013 2016 2002 2004 2007 2009 2010 2012 2014 2015 2017 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 East Asia and Pacific Europe and Central Asia Middle East & North Africa South Asia Sub-Saharan Africa Sources: UN Comtrade (WITS) and authors’ calculations. Notes: The vertical line denotes the year when BRI was announced. Iron and steel refer to SITC Rev. 3 code 67. Products included in the infrastructure-related aggregate are listed in Table A2. In contrast, the rise in the share of core BRI contributed 1.6 percentage points to countries in China’s exports of infrastructure- the 2 percentage points rise in the share related goods has been supported by different of core BRI, more than the contribution regions at different times (Figure 5). of any other region. • First, during the pre-crisis period, the Overall, from 2001-2017, the 15 percentage largest contributors to the 8.4 points gain in the share of all core BRI countries percentage points rise in the share for was distributed as follows: 6.5 percentage all core BRI countries were core BRI points due to East Asia and Pacific, 4.2 countries in Europe and Central Asia percentage points to South Asia, 3.5 percentage and South Asia with 3.2 and 2.4 points to Europe and Central Asia, and the rest percentage points respectively. to Middle East and North Africa and Sub- Saharan Africa. Despite a minimal contribution • Second, from 2011 to 2013, core BRI due to the small magnitude of its share, Sub- countries in East Asia and Pacific Saharan Africa has also experienced a dynamic experienced a surge in their share of trajectory in its share from the crisis until 2013 China’s exports, which led to this (see Figure A1 for shares in China’s exports group contributing most of the 4.7 indexed to 2001). Compared to the case of percentages point gain in the share of infrastructure-related goods, the rise in the all core BRI countries during that share of core BRI countries in China’s exports period. of iron and steel has been more balanced across the three periods. The contributions from • Third, between 2013 and 2016, core BRI different regions were as varied over time, and countries in South Asia have they followed similar patterns. December 2018 · Number 6 · 5 Figure 5. Changes in core BRI countries’ share in China’s exports of infrastructure -related goods, by region percent Infrastructure related-goods percent Iron and steel 25 25 20 20 15 15 10 10 5 5 0 0 -5 -5 2001-2007 2011-2013 2013-2016 2001-2017 2001-2007 2011-2013 2013-2016 2001-2017 percent East Asia and Pacific Europe and Central Asia Middle East and North Africa South Asia Sub-Saharan Africa Sources: UN Comtrade (WITS) and authors’ calculations. Notes: The vertical line denotes the year when BRI was announced. Iron and steel refer to SITC Rev. 3 code 67. Products included in the infrastructure-related aggregate are listed in Table A2. Finally, we analyze the trends in Chinese sharper increases in their shares since exports of infrastructure-related goods for 2011 and have continued to gain in the selected core BRI countries. In most cases, the recent years. surge in shares of infrastructure related exports from China that started well before 2013 • Kenya in Sub-Saharan Africa had more continued to proceed, and in some cases gained than tripled its share by 2013 reaching momentum, in correspondence with the formal a level that it has almost doubled since announcement of the Initiative. Figure 6 then. reports these shares and the shares for overall merchandise for comparison.5 Conclusion: 5 or 15? How Old is the BRI? • Countries in East Asia and Pacific, exhibit increased dynamism in the So how old is the Belt and Road Initiative? It share of China’s exports of appears that the BRI announcement in 2013 put infrastructure-related goods in the a stamp on a complex and, by then, already post-crisis period, with an ongoing process. As the trade data show, the intensification just before 2013. share of BRI countries in China’s exports Cambodia, Lao, Myanmar and started increasing in the early 2000s. In the case Vietnam continued to gain share up of infrastructure-related goods, this long-term until 2016, while Indonesia and trend was driven by core BRI economies. Yet, Malaysia experienced declines starting at least for some countries, namely in in 2014. developing East Asia but not only, trade data show an increased dynamism of China’s • Countries in Europe and Central Asia, exports of infrastructure-related goods around such as Kazakhstan experienced large 2013. Hence, the BRI announcement was not a gains before the crisis, but are yet to dramatic shift, but it brought new energy and return to shares attained at that time. focus to ongoing trends in China’s trade relations. • Countries in South Asia, such as Bangladesh and Pakistan have seen 5See also Figure A2, which provides shares and the highest shares in China’s exports of ranks as of 2003 and 2017, for the 50 countries with infrastructure-related products in 2017. December 2018 · Number 6 · 6 Figure 6: Share in China’s exports of merchandise and infrastructure-related goods, by country, 2001-2017 (percent) Cambodia Indonesia Lao PDR 0.25 3.00 0.16 2.50 0.14 0.20 0.12 2.00 0.10 0.15 1.50 0.08 0.10 0.06 1.00 0.04 0.05 0.50 0.02 0.00 0.00 0.00 2001 2003 2005 2007 2009 2011 2013 2015 2017 2001 2003 2005 2007 2009 2011 2013 2015 2017 2001 2003 2005 2007 2009 2011 2013 2015 2017 Malaysia Myanmar Vietnam 3.50 1.20 5.00 3.00 1.00 4.00 2.50 0.80 2.00 3.00 0.60 1.50 2.00 0.40 1.00 0.20 1.00 0.50 0.00 0.00 0.00 2001 2003 2005 2007 2009 2011 2013 2015 2017 2001 2003 2005 2007 2009 2011 2013 2015 2017 2001 2003 2005 2007 2009 2011 2013 2015 2017 Georgia Kazakhstan Tajikistan 0.12 1.00 0.14 0.10 0.12 0.80 0.10 0.08 0.60 0.08 0.06 0.40 0.06 0.04 0.04 0.02 0.20 0.02 0.00 0.00 0.00 2001 2003 2005 2007 2009 2011 2013 2015 2017 2001 2003 2005 2007 2009 2011 2013 2015 2017 2001 2003 2005 2007 2009 2011 2013 2015 2017 Bangladesh Pakistan Kenya 0.80 1.60 0.40 0.70 1.40 0.35 0.60 1.20 0.30 0.50 1.00 0.25 0.40 0.80 0.20 0.30 0.60 0.15 0.20 0.40 0.10 0.10 0.20 0.05 0.00 0.00 0.00 2001 2003 2005 2007 2009 2011 2013 2015 2017 2001 2003 2005 2007 2009 2011 2013 2015 2017 2001 2003 2005 2007 2009 2011 2013 2015 2017 Merchandise Infrastructure-related goods Sources: UN Comtrade (WITS) and authors’ calculations. Notes: Countries are listed by region as follows: East Asia and Pacific (6 countries); Europe and Central Asia (3 countries); South Asia (2 countries), Sub-Saharan Africa (1 country). Vertical line for 2013, the year of BRI’s announcement. Products included in the infrastructure - related aggregate are listed in Table A2. December 2018 · Number 6 · 7 References About the author(s): Cristina Constantinescu, Economist, World Bastos, Paulo. 2018. “Exposure of Belt and Bank’s Macroeconomics, Trade & Investment Road Economies to China Trade Shocks.” Global Practice World Bank Policy Research Working Paper ineagu@worldbank.org No. 8503. Michele Ruta, Lead Economist, World Bank’s Macroeconomics, Trade & Investment Global Boffa, Mauro. 2018. “Trade Linkages Between Practice the Belt and Road Economies.” World Bank mruta@worldbank.org Policy Research Working Paper No. 8423. Chen, Maggie and Chuanhao Lin. 2018. “Foreign Investment Across the Belt and Road: Patterns, Determinants and Effects.” World Bank Policy Research Working Paper No. 8607. De Soyres, Francois, Alen Mulabdic, Siobhan Murray, Nadia Rocha and Michele Ruta. 2018. “How Much Will the Belt and Road Initiative Reduce Shipment Times and Trade Costs?”, World Bank Policy Research Working Paper No. 8614. Reed, Tristan and Sasha Trubetskoy. (2018). “The Belt and Road Initiative and the Value of Urban Land.” Unpublished Working Paper, World Bank. December 2018 · Number 6 · 8 Annex Table A1. BRI and core BRI countries East Asia and Europe and Middle East and Sub-Saharan Pacific Central Asia South Asia North Africa Africa IDN AZE AFG IRN KEN KHM GEO BGD ARE TZA LAO KAZ IND BHR MMR KGZ PAK EGY MNG RUS BTN IRQ MYS TJK LKA ISR SGP TKM MDV JOR THA TUR NPL KWT VNM UZB LBN BRN ALB OMN HKG ARM PSE PHL BGR QAT TLS BIH SAU BLR SYR CZE YEM EST GRC HRV HUN LTU LVA MDA MKD MNE POL ROM SRB SVK SVN UKR Source: de Soyres et al. (2018), Reed and Trubetskoy (2018). Notes: Includes 68 BRI countries, as China and Taiwan are excluded. The 25 Core BRI countries are in bold font. December 2018 · Number 6 · 9 Table A2. China’s exports of infrastructure-related goods, 2017 2017 Exports % of % of merchandise Infrastructure SITC Rev. 3 code / name million USD exports exports Infrastructure-related goods: 317,085 14.0 100.0 74 Industrial equipment nes: 107,689 4.8 34.0 741 Indust heat/cool equipmt 24,381 1.1 7.7 743 Fans/filters/gas pumps 20,154 0.9 6.4 747 Taps/cocks/valves 14,644 0.6 4.6 744 Mechanical handling equi 14,128 0.6 4.5 745 Non-electr machines nes 8,954 0.4 2.8 748 Mech transmission equmnt 7,521 0.3 2.4 742 Pumps for liquids 6,991 0.3 2.2 749 Non-elec parts/acc machn 5,857 0.3 1.8 746 Ball/roller bearings 5,059 0.2 1.6 69 Metal manufactures nes: 65,223 2.9 20.6 699 Base metal manufac nes 29,335 1.3 9.3 691 Iron/stl/alum structures 14,031 0.6 4.4 695 Hand/machine tools 10,283 0.5 3.2 694 Nails/screws/nuts/bolts 6,413 0.3 2.0 693 Wire prod exc ins electr 3,167 0.1 1.0 692 Metal store/transpt cont 1,994 0.1 0.6 67 Iron and steel 55,756 2.5 17.6 66 Non-metal mineral manuf.: 27,373 1.2 8.6 664 Glass 7,871 0.3 2.5 663 Mineral manufactures nes 6,785 0.3 2.1 662 Clay/refractory material 6,668 0.3 2.1 661 Lime/cement/constr matl 6,049 0.3 1.9 79 Railway/tramway equipmnt: 25,495 1.1 8.0 793 Ships/boats/etc 22,933 1.0 7.2 791 Railway vehicles/equipmt 2,562 0.1 0.8 68 Non-ferrous metals 23,310 1.0 7.4 64 Paper/paperboard/article: 8,601 0.4 2.7 641 Paper/paperboard 8,601 0.4 2.7 27 Crude fertilizer/mineral: 2,695 0.1 0.9 278 Other crude minerals 2,320 0.1 0.7 273 Stone/sand/gravel 375 0.0 0.1 28 Metal ores/metal scrap 943 0.0 0.3 Sources: UN Comtrade (WITS) and authors’ calculations. December 2018 · Number 6 · 10 Figure A1. Share of core BRI countries in China’s exports of infrastructure-related goods, by region, 2001-2017 index: Infrastructure - related goods index: Iron and steel 2001=100 2001=100 600 900 800 500 700 400 600 500 300 400 200 300 200 100 100 0 0 2003 2004 2005 2009 2010 2011 2016 2017 2001 2002 2006 2007 2008 2012 2013 2014 2015 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 East Asia and Pacific Europe and Central Asia Middle East & North Africa South Asia Sub-Saharan Africa Sources: UN Comtrade (WITS) and authors’ calculations. Notes: The vertical line denotes the year when BRI was announced. Iron and steel goods refer to SITC Rev. 3 code 67. Products included in the infrastructure-related aggregate are listed in Table A2. December 2018 · Number 6 · 11 Figure A2. Top 50 countries, by the share in China’s exports of infrastructure-related goods in 2017 and their corresponding shares and ranks in 2003 and 2017 2001 2017 rank / country code country code (share) (share) / rank 1 USA(18.04%) USA(13%) 1 2 HKG(14.08%) KOR(6.01%) 2 3 JPN(13.42%) HKG(5.79%) 3 4 KOR(5.91%) JPN(5.21%) 4 5 DEU(3.81%) VNM(3.82%) 5 6 NLD(3.53%) IND(3.42%) 6 7 SGP(2.91%) SGP(2.65%) 7 8 ITA(2.55%) THA(2.55%) 8 9 GBR(2.53%) DEU(2.55%) 9 10 CAN(1.67%) MYS(2.49%) 10 11 IDN(1.48%) IDN(2.43%) 11 12 AUS(1.47%) RUS(2.29%) 12 13 THA(1.2%) AUS(2.18%) 13 14 ESP(1.14%) GBR(1.9%) 14 15 VNM(1.14%) PHL(1.8%) 15 16 FRA(1.14%) ITA(1.66%) 16 18 MYS(1.13%) CAN(1.6%) 17 19 ARE(1.07%) MEX(1.59%) 18 20 DNK(.82%) NLD(1.56%) 19 21 IND(.76%) ARE(1.48%) 20 22 PHL(.75%) PAK(1.42%) 21 23 BEL(.73%) IRN(1.42%) 22 24 IRN(.71%) BRA(1.4%) 23 25 IRQ(.68%) SAU(1.33%) 24 26 SAU(.57%) TUR(1.22%) 25 27 BRA(.52%) ESP(.99%) 26 28 NGA(.5%) FRA(.99%) 27 29 ISR(.46%) MHL(.88%) 28 30 RUS(.44%) ZAF(.78%) 29 31 ZAF(.43%) POL(.77%) 30 32 EGY(.43%) BEL(.77%) 31 33 MEX(.42%) CHL(.74%) 32 34 MMR(.4%) BGD(.73%) 33 36 TUR(.37%) NGA(.67%) 34 37 LBR(.36%) EGY(.64%) 35 38 ARG(.36%) IRQ(.6%) 36 39 PAK(.33%) MMR(.6%) 37 40 BGD(.3%) DZA(.59%) 38 42 PAN(.26%) ISR(.53%) 39 46 POL(.21%) ARG(.51%) 40 47 CHL(.2%) PAN(.51%) 41 55 KAZ(.13%) KAZ(.49%) 42 64 DZA(.1%) MLT(.48%) 43 73 UKR(.07%) LBR(.46%) 44 75 GHA(.07%) PER(.44%) 45 76 PER(.06%) COL(.4%) 46 77 COL(.06%) GHA(.35%) 47 78 KEN(.06%) KEN(.34%) 48 86 MLT(.04%) DNK(.33%) 49 142 MHL(0%) UKR(.32%) 50 Source: UN Comtrade (WITS) and author’s calculations. The shares in China’s exports of infrastructure-related goods are provided in parentheses. The black arrows indicate increases in the shares of BRI countries; the grey arrows indicate declines in the shares of BRI countries. Not all increases in the share correspond to increases in the rank. Countries indicated by ISO3 codes. BRI countries are in bold font. December 2018 · Number 6 · 12