Zhao Laixun │ How Do Diplomatic Conflicts Affect Bilateral Trade: Insights from China's Practice
On the morning of December 8, 2018, the third session of the academic seminar on "International Trade Relations and the Restructuring of Global Economic Governance"—"Basic Facts of Sino-US Economic Relations and International Trade Friction"—was successfully held at Tsinghua University. Renowned scholars from the academic community participated in the conference. Professor Lex Zhao, Professor of Economics at Kobe University, delivered an academic report entitled "How Diplomatic Conflicts Distort Bilateral Trade—Evidence from China" (original English title: How Diplomatic Conflicts Distort Bilateral Trade).
Professor Zhao Laixun delivered an academic report entitled "How Diplomatic Conflicts Distort Bilateral Trade—Evidence from China" (original English title: How Diplomatic Conflicts Distort Bilateral Trade—Evidence from China). Existing research largely focuses on major events and reduces research at the corporate level. Building on this, Professor Zhao and his team investigated quarterly trade data at the corporate level in different countries from 2000 to 2010. Regarding conflict, they used a scoring system that excludes economic conflicts, considering only government-to-government conflicts, with -10 representing the most severe conflict, balancing major and minor issues. They conducted empirical analyses on three types of companies: state-owned enterprises (SOEs), foreign-invested enterprises (FIEs), and privately-invested enterprises (PIEs). The following conclusions were drawn: 1. Government-initiated conflicts generally reduce China's imports, but capital goods imports will continue to grow; 2. Conflicts generally do not reduce imports by Chinese state-owned enterprises; 3. Conflicts reduce imports by FIE enterprises, but not by PIE enterprises; 4. Conflicts have a greater impact on general trade than on processing trade; 5. Conflicts reduce imports from non-neighboring countries more than those from neighboring countries.
Dr. Tian Yuan, a postdoctoral researcher at Carnegie Mellon University, reviewed Professor Zhao's article. Dr. Tian first summarized the content and then offered suggestions. She suggested adding descriptive statistics on the timing, intensity, frequency, and types of conflicts. For single conflicts, she proposed using event study methods for more specific research. She further suggested examining aspects such as positive events, the stock and foreign exchange markets, the import recovery process, and the impact of conflicts with country A on country B's imports. Following this, Dr. Zhang Yan and other participating scholars engaged in further discussion of Professor Zhao's article.
Lex Zhao (pictured above, first from right) is currently a professor at the Institute of Economics and Management, Kobe University, Japan, and an internationally renowned Chinese economist. He graduated from the University of Florida in 1993 with a Ph.D. in Economics and subsequently taught at several universities in Japan, and was a visiting scholar at Stanford University. His research areas are international economics and the Chinese economy, and he has published dozens of papers in top-tier or well-known international economics journals such as the Journal of International Economics, the Journal of Labor Economics, and the European Economic Review.