The Influence Of Cultural Distance On Bilateral Trade Between China And Belt And Road Countries

Profound changes have taken place in world’s politics and economy in recent years and domestic economic development is facing complex and severe challenges.Against this background,during the state visits of Chinese President Xi Jinping in 2013,he proposed the "Belt and Road" initiative in line with the economic cooperation and development of Asian and European continents,including the Silk Road Economic Belt and 21st Century Maritime Silk Road.It has been planned to promote trade and economic cooperation among countries along the route and many of them have actively responded to this initiative up until now.The countries that have signed documents span not only the continents of Europe,Asia and Africa,but also Oceania and the Americas.It shows that this massive geographic scope of area will provide difficulties and challenges because of countries’ huge differences in culture,customs,religion and law systems.Therefore,it is necessary to figure out whether cultural diversity will affect bilateral trade between China and other countries.The contents of this paper mainly include measuring the extent to which cultural distance and specific cultural dimensions may have an influence on bilateral trade between China and countries along the route and exploring for what kind of features of this influence may have.Firstly,from the perspective of Hofstede’s six-dimensional cultural distance theory,this paper collects 61 target countries’ data in individualism/collectivism,power distance,uncertainty avoidance,masculinity/femininity,long-term orientation/short-term orientation and indulgence/restraint.Based on KSI model and Euclidean distance,two formulas are constructed to calculate cultural distance and sub-dimensional cultural distance variables.Due to the fact of culture distance varying with time,this article refers to Ji Jianhong et al.(2012),incorporating the time length’s reciprocal of diplomatic relations between China and target countries in the two formulas.Secondly,employing the classic trade gravity model and adding other explanatory variables,the author conducts linear and nonlinear regressions with bilateral trade data between China and "Belt and Road" countries from the year 2008 to 2018.The result implies that the effect of cultural distance on the bilateral trade is negative after the regression of linear model,but the results of significance tests performed with two different measurement tools for cultural distance are not consistent.The result of nonlinear regression shows a significant U-shaped relationship for the bilateral trade.That means when cultural distance among countries gradually expands,the bilateral trade flow will reduce due to transaction costs and demand preferences and once the cultural distance reaches to a certain point,the flow will begin to increase by reason of trade complementarity.As for six sub-cultural dimensions’ influence on the bilateral trade,the results differ from each other.The linear regression results of these suggest little significance with an exception of that of power distance dimension.Furthermore,the results from nonlinear regression reveals that larger power distance is negatively correlated with bilateral trade flow and individualism/collectivism and long-term orientation/short-term orientation dimensions have a positive effect.Unfortunately,the influence of uncertainty avoidance,masculinity/femininity and indulgence/restraint cannot be determined.The innovation of the paper lies in employing two kinds of cultural distance measurement methods to enhance the accuracy of regression analysis.At the same time,compared with some related researches based on Hofstede’s traditional four-dimensional cultural distance,this paper conducts an empirical analysis in a relatively comprehensive way by using his latest six-dimensional theory.All in all,from the conclusions of the paper,it is shown that improving cultural exchanges among countries is beneficial for international economic and trade cooperation,which is consistent with the key contents of "Belt and Road" initiative and the social basis for win-win cooperation.Government and enterprises should promote the spirit of traditional Chinese culture.Meanwhile,they should actively learn from target countries’cultural background with an open and inclusive attitude,increase mutual trust and understanding and deepen friendship among people in order to reduce the cost of bilateral trade and to make trade cooperation in an all-round way.