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Abstract
The purpose of this study is to evaluate the effect of People’s Republic of China’s Belt and Road initiative strategy on trade and welfare in Eastern Africa. In 2013, Chinese President Xi Jinping announced a proposal for a “Silk Road Economic Belt” and a “21st Century Maritime Silk Road”, formally known as Belt and Road Initiative(BRI). The BRI will be funded by a US$ 40 billion Silk Road Fund from the Asian Infrastructure Investment Bank. The BRI routes will run through countries in Asia, Europe, and Africa. In Eastern Africa, the countries along the BRI include Kenya, Ethiopia, Tanzania and Djibouti. One of the BRI projects in Eastern Africa, the standard gauge railway is already under construction. It will connect the ports of Mombasa and Dar-es-salaam to Kenya, Uganda, Tanzania and Rwanda. The standard gauge railway is expected to reduce transport costs in the region, which has implications for trade and welfare.This study uses the Global Trade Analysis Project (GTAP) computable general equilibrium (CGE) model and the latest GTAP 10 database to analyse the effects of the establishment of the BRI. We conduct policy simulations (reduced transport costs for imports and exports) to evaluate the impact of the BRI on trade and welfare in Eastern Africa. Keywords: General equilibrium; Economic integration; China; Africa JEL Classification: F15, I32, L91, O19