Applying Gravity Model in International Trade to China’s OBOR Policy Initiative

Abstract

China’s New Silk Road project is a large and ambitious project, but it has been operational though far from completion. It involves building transportation and communication infrastructures, to include digital commerce. The purpose of this essay is to assess how much trade is created in China’s Belt and Road project spanning countries in West Asia, Western Europe and other significant Belt countries. China aims to be the largest economy in the world. Will the New Silk Road make China realize the “Chinese dream”?In this essay, we described the concept of the Gravity Model, how this can be used to analyze international trade activities and determine China’s level of growth.Before we delve into the quantification of the benefits, we have to explain first the Gravity model and other significant facts about China’s “One Belt, One Road” project. At the end of the essay, we provide a detailed analysis of the trade created by the Belt Road countries, and concluded that economic size of China, along with the economic sizes and market sizes of foreign partners and cultures of have huge impact on bilateral trade flows between China and the Belt Road countries.

Keywords: gravity model, China OBOR, international trade.