Impact of regional interactions on China?s trade performance: evidence from a spatial econometric approach

In this paper, we examine the impact of regional interactions on China?s trade performance as supported by infrastructure development, using exports and imports of Chinese-owned and foreign-owned firms disaggregated for 28 provinces. Taking into account the disparities in the regional economic activities, we use five spatial weight matrices in a spatial panel lag and spatial panel error frameworks in the period 1996?2016. The spherical distance and the gasoline usage weight matrices measure the impact of ground connections on China?s trade flows. The nautical miles and the river distance weight matrices measure the impact of maritime and river connections on trade flows for provinces along the sea coast, in the Yangtze valley, and along Zhu river, respectively. We find significant cross border effects on provincial trade flows. The effects vary between areas and firms. Overall, our findings show positive influence of regional interactions on China?s international trade performance.