Determinants of China’s Technological Trade Flows with Central Asian Countries (CACs): A Panel Gravity Approach

Abstract

The purpose of this study is to examine the determinants of Chinese technological trade flows with Central Asian countries (CAC) with a revealed comparative advantage and the gravity model using two estimation techniques. The present study employs the Ordinary Least Square (OLS) and the Poisson pseudo-maximum likelihood (PPML) on the data set from 2003 to 2018 panel dataset. Results from the Gravity model demonstrates that low-tech, medium-tech, and high-tech trade flows boost economic development in China and Central Asian nations, adversely affecting all technology trade flows in geographical distance. The research indicated that exchange rates showed a negative indication in bilateral trade, medium-tech trade, and high-tech trade. In contrast, the low technology trade showed a positive flow between China and Central Asia. Furthermore, the results reveal that openness to trade and membership of the WTO show a positive indication. The trade openness policy on both sides thus has a major beneficial effect on trade volumes. It proposed increased liberalization of trade policy and greater involvement in global commerce. In addition, Central Asia and export industries should take additional initiatives to enhance and diversify high-tech exports. A competitive international market provides perfect equality in reciprocal trade interactions.