Sigurður Guðjonsson

School of Business, University of Iceland,

Iceland 

siggig@hi.is 

ORCID 0000-0001-8897-3699

Who benefits of trade with China? Examining the effects of free trade agreements on trade flow with China using an adjusted gravity model

Inga Minelgaite

School of Business, University of Iceland,

Iceland 

inm@hi.is 

ORCID 0000-0002-4026-3222

Hrafnhildur Kristinsdóttir

Marketing Consultant

hrafnhildurkristins@gmail.com

Jelena Stankevičienė

Department of Financial Engineering, Vilnius Gediminas Technical University,

Lithuania

jelena.stankeviciene@vilniustech.lt 

ORCID 0000-0002-5600-5842

Abstract. China has numerous free trade agreements with various countries. In this research it will be examined who benefits from those free trade agreements. The sample includes 27 countries trading with China but 13 of these countries have signed a free trade agreement with China, or roughly half of all the available countries in our sample. The sample data are from 2001 – 2017. An adjusted gravity model and a linear regression was carried out. While those countries that have made free trade agreement with China experienced modest or no increase in export to China, China itself experienced significant increase in export to its free trade partners after the agreement took place. In comparison, we carried out a linear regression of the total 27 countries where the trading countries experienced increase in export to China and China itself experienced increase in export to these countries as well. It is therefore safe to conclude that China is a beneficiary of free trade agreements at least as much as it´s trade partners.

Received: December, 2020

1st Revision: June, 2021

Accepted: August, 2021

DOI: 10.14254/2071-8330.2021/14-3/1

JEL Classification: C3, F14

Keywords: China, free trade agreements, gravity model, import, export, international business