Abstract

The concept of institutional distance has been gaining prominence in the context of international trade. Recent research has indicated that the impact of institutional distance on exports can be either positive or negative, and is determined by the interplay between substitution and complementary effects arising from trade costs and preferences. The present study investigates the significance of institutional distance in the trade partnership between China and African and Asian countries. In this study, we utilize export trade data at the product-level between China and 103 trading partners, of which 48 are located in Africa and Asia, to estimate the extended gravity model. To investigate the potential impact of institutional distance, we employ a nonlinear gravity equation. The time frame for our analysis spans from 2006 to 2020. Our analysis reveals that the presence of institutional distance poses a significant obstacle to China’s export activities, primarily due to the associated trade costs. China’s export hindered by institutional distance. In addition, the impact of institutional distance on China’s exports is subject to variation based on differentiated products and the geographical location of trading partners.

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