Port power and trade flows: Evaluating China's infrastructure leverage in EU markets through a gravity model

This study investigates how Chinese ownership in European ports affects trade flows between China and Eurozone countries, set against the backdrop of recent global economic disruptions that have emphasized the crucial role of maritime trade and port efficiency. An augmented gravity model was employed, using the Poisson pseudo-maximum likelihood (PPML), fixed effects (FE), and random effects (RE) estimators, to analyze trade data from 2001 to 2023. The analysis shows that, while conventional economic factors like GDP per capita and the Logistics Performance Index (LPI) consistently and significantly drive trade, Chinese port ownership surprisingly exhibits a negative or statistically insignificant impact on both Chinese exports to the EU and EU imports from China. This suggests that these acquisitions may not primarily boost overall bilateral trade but rather consolidate existing routes or serve broader strategic objectives, as evidenced by heterogeneous country-specific effects and phenomena like the 'Rotterdam effect'. Ultimately, my findings underscore the paramount importance of logistical efficiency over ownership structure in facilitating trade.