Do Political Relations Colour Chinaʼs Trade With Southeast Asian Partners? A Vector Autoregression Approach

Abstract

This paper investigates whether and how export growth to China varies following shocks in bilateral political relations between China and six Southeast Asian countries—Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam—between 2000 and 2019. High-frequency news data is used to quantify bilateral political relations between each of the six countries and China. Then, a net cooperation index, plus separate indices of political cooperation and conflict, are placed in an augmented gravity model of trade situated in a vector autoregression framework alongside real exchange rate and industrial production variables to examine the short- (months) and long-run (years) effects of shocks to bilateral political relations on each countryʼs exports growth to China. The results reveal that political relations with China played a role in Thailandʼs and Vietnamʼs exports growth to China but not in Indonesiaʼs, Malaysiaʼs, the Philippinesʼ and Singaporeʼs, and contribute new findings to the literature on politics and trade. Code and data for the analysis is available at: https://github.com/tradepolsrepository/tradepols.git.