Empirical Analysis of Trade Cost Impacts on Cross-Border

e-Commerce Competitiveness: A Case Study of China and 'Belt and

Road' Countries in the Digital Economy

Yiyuan Hu

School of Statistics, Capital University of Economics and Business, Taipingqiao Street, Beijing Fengtai, China

Keywords: Digital Economy, Cross-Border e-Commerce, Trade Costs, Belt and Road.

Abstract: Trade expenses significantly influence the growth of the digital economy and international e-commerce.

Minimizing the expenses associated with international transactions and enhancing the efficacy of digital

commerce are crucial strategies for international e-commerce platforms to boost their profitability. Moreover,

it represents a vital approach for nations to foster external economic engagement and achieve lasting economic

progress. This study utilizes the dataset from China and the nations involved in the "Belt and Road" initiative

to perform an empirical examination of how lowering trade expenses can enhance the competitiveness of

international e-commerce. The research identifies that several elements, including geographical distance,

regulatory differences, levels of economic development, and economic liberty, impact the expenses of

international e-commerce. Specifically, strategies like diminishing the costs of information retrieval,

streamlining delivery and logistics expenses, and reducing the costs associated with sales channels can offer

significant opportunities and competitive advantages for the growth of international e-commerce.

1 INTRODUCTION

At a time when inflationary pressure continues to rise

and the cost of production and living is rising, solving

the problem of economic development has become an

increasingly urgent global challenge. In the

meantime, the swift advancement in information

technologies, including artificial intelligence, big

data, blockchain, and cloud computing, is propelling

a significant information technology revolution

globally (Zhichao, Xue, 2019; Peiyao and Tao, 2019).

In the face of simultaneous economic and

technological shifts, the concept of the digital

economy has taken centre stage. It significantly

contributes to the enhancement of supply chain and

industrial chain efficiency by enabling swift and

effective data flow and distribution. This role of the

digital economy is critical for optimizing and

upgrading these chains, thus playing a key role in the

ongoing transformation. Furthermore, it supports the

seamless development of economic and industrial

activities both domestically and internationally

(Yanghua, 2024), and has become an important

https://orcid.org/0009-0001-0370-4973

engine to boost economic growth and pull the

recovery of the global economy.

Over the last ten years, swift progress in digital

technologies and infrastructure has dramatically

transformed the realm of business operations,

modifying organizational structures and corporate

culture. These alterations have paved the way for new

methods of innovation, marketing strategies, and

product categories (Zeljko and Dmitry, 2019).

Additionally, the widespread adoption and

convenience of social media have catalyzed the

inclination towards online purchases on an

international level, laying a foundational stone for e-

commerce expansion and propelling the growth of

cross-border online trade. This surge in e-commerce

activity has notably impacted global commerce. E-

commerce, benefiting from its low entry costs, offers

an advantageous platform for small and medium-

sized enterprises to generate global revenue, marking

a significant stride in their development. E-commerce

promotes the optimization of supply chain

management, further reduces logistics costs, and its

platform attributes also increase the transparency of

Hu, Y.

Empirical Analysis of Trade Cost Impacts on Cross-Border e-Commerce Competitiveness: A Case Study of China and ’Belt and Road’ Countries in the Digital Economy.

DOI: 10.5220/0012938000004508

Paper published under CC license (CC BY-NC-ND 4.0)

In Proceedings of the 1st International Conference on Engineering Management, Information Technology and Intelligence (EMITI 2024), pages 349-353

ISBN: 978-989-758-713-9

349

market prices, reduce the cost of obtaining

information for all parties, bring a fierce and healthy

competitive environment, and give entrepreneurs the

opportunity to start and expand their business.

On the whole, big data technology has broken the

information barriers in the trade market, and e-

commerce enterprises can obtain valuable

information by means of information technology so

as to effectively reduce information search, sales

channels, delivery and transportation and many other

operating costs, and make innovative decisions for

consumer behavior, opening up the living space of

enterprises and ushering in new trade development

opportunities. Therefore, the digital economy, as an

emerging economic form, can not only reduce

enterprise costs and improve economic profits, but

also promote the development of the overall cross-

border e-commerce trade.

China has leveraged policy support, tax

incentives, and streamlined customs procedures to

effectively lower the trading costs associated with e-

commerce. Additionally, the development of a robust

electronic payment system, data protection

mechanisms, and network security infrastructure has

contributed to market standardization. Hence, this

investigation seeks to analyze the transaction costs

involved in e-commerce interactions between China

and a selection of Belt and Road Initiative nations. It

endeavors to formulate a strategy that elevates the

competitive edge of cross-border e-commerce

transactions and bolsters the development of the

national economy.

2 LITERATURE REVIEW

China's total foreign trade ranks among the top in the

world, and the scale of digital economy development

is also relatively large. According to preliminary

statistics in 2023, there will be 645,000 enterprises

with export and import performance in China, among

which more than 100,000 cross-border e-commerce

entities (Shouwen, 2024). This shows that China, as

the world's largest exporter, has a large scale of digital

economy development and has made important

contributions to global digital economy growth.

Therefore, the current trade performance of China's

cross-border e-commerce has important research

significance under the topic of how to achieve "cost

reduction and efficiency increase".

Since its inception in 2013, the Belt and Road

Initiative has acted as a catalyst for expanding trade

relations between China and the countries along the

BRI route. According to data from China's General

Administration of Customs, trade volumes have

surged from 6.46 trillion yuan at the outset of the

initiative to 11.6 trillion yuan, marking an average

annual growth rate of 7.5%. This growth has elevated

China's trade with BRI countries from 25% to 29.7%

of its total international trade. Notably, in 2023, cross-

border e-commerce transactions between China and

these countries amounted to 2.38 trillion yuan, with

exports accounting for 1.83 trillion yuan (a 19.6%

increase) and imports totaling 548.3 billion yuan (a

3.9% increase). The consumer base engaging in

cross-border e-commerce imports expanded to 163

million in 2023, further underscoring the initiative's

impact on the digital commerce economy.

A plethora of academic investigations have

underscored the pivotal role digital commerce plays

in the economic advancement of nations.

Contemporary studies predominantly shed light on

the determinants shaping cross-border electronic

commerce within the digital economy paradigm and

their effects on global trade dynamics. In a seminal

work, a scholar delineates the framework for the

elevated progression of China’s cross-border e-

commerce under the digital economy umbrella,

pinpointing hurdles including regulatory oversight,

the breadth of support services, and the cultivation of

premier brand identities, make a blueprint for

enhancing trade development via digital innovations

is proposed (Peng, 2024). Researcher Wang, Y.

delves into the repercussions of the digital economy

on China’s cross-border e-commerce evolution,

mediated by factors such as transaction costs and

productive efficacy. Research indicates a significant

boost provided by the digital economy to China's

cross-border e-commerce, particularly affecting trade

exports (Yu and Yi, 2017). Additionally, another

study uses an enhanced trade gravity model to

measure the logistics performance index, offering

empirical insight into the factors affecting transaction

volumes in cross-border e-commerce between China

and the Belt and Road countries. This analysis

demonstrates that factors such as geographical

closeness, per capita income, and consumer

demographics play a crucial role in influencing the

scale of cross-border e-commerce transactions

(Yanan, 2020).

To sum up, there is a lot of empirical research on

international trade, so as to provide references and

suggestions for theoretical practice. But a closer look

can also reveal some shortcomings:

Initially, the prevailing research largely focuses

on the effects of digital trade development, focusing

on the impact of cross-border e-commerce on

international trade, considerable attention has been

EMITI 2024 - International Conference on Engineering Management, Information Technology and Intelligence

350

paid to the role of the digital economy in facilitating

the growth of cross-border trade and the prospective

expansion of cross-border e-commerce. Nonetheless,

these analyses often overlook the specific factors

contributing to the competitiveness of cross-border e-

commerce or the ways in which digital trade costs can

affect the competitive advantage of e-commerce

transactions. Furthermore, there is a notable scarcity

of comparative analyses regarding various trade

costs. While the influence of disparate trade costs on

the growth of cross-border e-commerce is

acknowledged, there exists a lack of detailed

comparison regarding the prioritization of trade cost

management.

Hence, the unique contribution of this manuscript

lies in its utilization of empirical analysis techniques

to investigate the effects of different trade costs on

both cross-border e-commerce and the broader digital

trade landscape. It aims to pinpoint critical factors by

evaluating the positive and negative impacts of

various trade costs and their management approaches,

thereby offering insights into optimizing cross-border

e-commerce operations.

3 RESEARCH

3.1 Research Design

The investigation bifurcates into two distinct

segments: Firstly, examining the effect of trade costs

on the proliferation of domestic e-commerce trade

within China, and secondly, analyzing the disparity in

digital competitiveness and trade costs across various

nations in the international trading arena. The

examination of e-commerce trade at the provincial

level in China utilizes data extracted from the "China

Statistical Yearbook" and information from six issues

of the "Cross-border E-commerce Comprehensive

Pilot Zone List" published by The State Council,

covering the development of cross-border e-

commerce pilot zones and per capita GDP from 2015

to 2022. In parallel, the analysis of digital

competitiveness among countries employs data from

the World Development Indicators (WDI) of the

World Bank, the CEPII database, the China Customs

database, and relevant scholarly works. It is crucial to

acknowledge that barriers to trade between two

countries can appear in different guises, such as

tariffs, quotas, and an assortment of non-tariff

barriers, including import licenses or technical

standards. Additionally, the time it takes to ship

goods can act as another type of trade barrier

(François, Alen, Siobhan, Nadia and Michele,

2019). Otherwise, as supply chains increasingly

globalize, it's critical to account for the geographical

positions of supply chain participants in evaluating

the performance advantages of supply chain practices,

such as purchasing tools (Frank and Eamonn, 2017).

Therefore, another section includes data on China's

GDP and that of 36 other countries and regions

connected to the "Belt and Road" initiative. This data

elaborates on the geographical and institutional

distances, differences in economic freedom, and the

export values between China and these entities,

emphasizing the data from the year 2019.

The challenge arises from the inability to directly

quantify the alleged costs, leading researchers to

predominantly utilize indirect methodologies. They

propose models that simulate bilateral trade flows and

associate these flows with surrogate variables

designed to signify trade barriers (David, 1999). In

assessing countries' digital competitiveness, most of

the previous studies used the traditional gravity model

to study the trade flow between two countries, which

can estimate the influence of geographical distance,

economic scale, economic freedom and other factors

on the trade flow. However, considering that the

logarithmic transformation of the independent

variable is carried out and there may be more complex

nonlinear relationships between variables, this paper

chooses to establish the following generalized

additive model for analysis:

log(Exports + 1) = β₀+ s(log(GDP + 1)) +

s(log(Dist + 1)) + s(Policy) + s(Freedom) + ϵ

(1)

Exports represent China's exports in countries or

regions along the Belt and Road, and s(GDP) is a

smooth term of GDP to capture the non-linear

relationship between GDP and exports. s(Dist) is the

smoothing term of geographical distance from China,

s(Policy) is the smoothing term of institutional

differences, and s(Freedom) is the smoothing term of

economic freedom.

3.2 Empirical Research

Analyzing the annual changes in average metrics of

digital economic growth across China's provinces

uncovers a deliberate extension of cross-border e-

commerce pilot zones from coastal areas to a wider

expanse of the country. This expansion correlates

with economic disparities, where coastal provinces

typically exhibit superior economic performance

compared to their inland counterparts, a trend that

aligns with the establishment of these pilot zones.

Furthermore, an upward trajectory in the Gross

Domestic Product of these provinces over time

Empirical Analysis of Trade Cost Impacts on Cross-Border e-Commerce Competitiveness: A Case Study of China and ’Belt and Road’

Countries in the Digital Economy

351

suggests a linkage to the pilot zones' establishment, a

hypothesis supported by linear model analysis which

fails to refute this association. The advent of the

digital economy has significantly bolstered the trade

competitiveness of provinces by streamlining

information search costs, marketing channel

expenditures, and management services, thereby

mitigating governance costs and influencing cross-

border trade expenses to achieve cost reduction and

efficiency enhancement.

The inception of cross-border e-commerce pilot

zones has catalyzed investments in infrastructure,

digital innovation, digital industry, and governance.

The adoption of a clustered development approach

coupled with favorable policy frameworks has

curtailed operational and managerial expenses for e-

commerce enterprises, thereby fostering a

competitive and collaborative development

atmosphere among e-commerce entities.

Figure 1: Construction of cross-border trade pilot zones in

China's provincial-level administrative regions.

Recent empirical findings on a country's digital

competitiveness indicate that boosting digital trade

competitiveness markedly lowers the expenses

associated with cross-border commerce between

China and the "Belt and Road" affiliated countries.

The economic growth level, extent of economic

liberty, geographical proximity, and institutional

variances between China and its trading counterparts

each play a role in shaping the costs linked to China's

cross-border e-commerce trade. A greater alignment

in cultural and economic progression levels enhances

the efficiency of cross-border trade relations.

Consequently, e-commerce entities tend to favor

trading partners that are geographically nearer, as this

choice leads to diminished logistics costs.

Table 1: Regression result of digital competitiveness of Belt

and Road countries.

Term Estimate

Std.

Error

t value Pr(>t)

Parametric Coefficients

Intercept 20.31924 3.26022 6.232

<0.0001

***

Polic

-0.48604 0.39872 -1.219 0.235

Freedom 0.03078 0.04549 0.677 0.505

roximate Si

nificance of Smooth Terms

s(log_GDP) 0.0807 .

s(log_Dist)

<0.0001

***

P.S. Note: *** p < 0.001, **p < 0.01. *p < 0.1

The Gross Domestic Product of a nation serves as

a robust indicator of its economic and trade prowess,

facilitating enterprises within that nation to leverage

digital trade platforms for publicity, negotiation, and

transactions, thereby enhancing trade pairings

between parties. This mechanism also permits the

efficient oversight and management of the

transportation process through real-time data

exchange, elevating the efficiency of customs

processes in cross-border trade. It underscores the

pivotal role of GDP in diminishing costs and

augmenting efficiency within cross-border trade

enterprises, markedly influencing export volumes.

Moreover, the relationship between geographical

distance and trade volumes exhibits a nonlinear

dynamic, where increased distances escalate trade

costs, consequently diminishing trade volumes.

Given the significant impact of geographical distance

on logistics expenses for cross-border e-commerce,

effective communication and matching strategies are

crucial in the preliminary stages. Selecting cost-

efficient transport solutions and negotiating

appropriate contracts are imperative measures to

minimize the tangible distances involved.

Conversely, while the effects of institutional

disparities and economic freedom levels on trade

volumes appear minimal, macro-level observations

indicate a trend where countries boasting higher

economic freedom often register superior trade

volumes. This insight underscores the complex

interplay between regulatory environments and trade

outcomes.

4 CONCLUSIONS

In light of the research conducted, it becomes evident

that prompting traditional enterprises towards digital

transformation holds critical importance. This

transition is pivotal for optimizing resource allocation

100

Anhui

Gansu

Guizhou

Henan

Hunan

Jiangxi

Ningxia

Shanxi

Sichuan

Xinjiang

Chongq…

Number of comprehensive pilot zones for cross-…

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352

and bolstering the competitiveness of products. The

path to research, development, and innovation within

digital technologies is marked by lengthy cycles,

substantial investment requirements, and uncertain

returns. Consequently, the effective employment of

digital technology across various domains such as

production, logistics, payment systems, and

management is paramount to achieving cost

efficiency and enhanced productivity (Saeed, 1998).

Furthermore, the development and refinement of

current cross-border trade pilot zones and e-

commerce systems reveal substantial opportunities

for cost reduction and efficiency enhancement. It

necessitates a comprehensive coordination among

customs, national taxation bodies, and inspection

agencies. It's essential to prioritize the development

of public information service platforms to create an

enabling environment for cross-border e-commerce.

Improving the integration and efficiency of cross-

border trade pilot zones, as well as boosting industrial

competitiveness, are crucial measures for maintaining

strong international connections. Such efforts not

only refine the operational structure but also lay the

groundwork for future innovations in cross-border

trade.

Third, the establishment of relevant trade

cooperation mechanisms between countries is

conducive to reducing tariff barriers, providing free

and convenient space for trade exchanges, and

effectively reducing trade costs. Combined with

geographical advantages, trade cooperation has

driven the digital competitiveness of countries along

the "Belt and Road", narrowing the marginal trade

differences between different countries, and is a

feasible way to maximize the function of digital trade

competitiveness in cross-border trade of "reducing

costs and increasing efficiency".

In order to effectively alleviate the trade cost

problems caused by cultural and institutional

differences, do a good job in the language

construction of cross-border e-commerce network

platforms to ensure the accuracy and popularity of

translation (Anqi, 2020). Vigorously introduce

language professionals, deeply understand the

cultural and institutional differences of different

countries and solve the obstacles of online

transactions while reducing logistics costs.

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Empirical Analysis of Trade Cost Impacts on Cross-Border e-Commerce Competitiveness: A Case Study of China and ’Belt and Road’

Countries in the Digital Economy

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