When trade meets tradition: unpacking cultural differences and their impact on China's international trade.

Yu, Bin; Zhong, Xingyu; Ghimire, Binam; Sapkota, Niranjan

Abstract

Amidst renewed trade tensions and heightened uncertainty in global financial markets, this paper examines the impact of cultural differences on China's international trade. Departing from majority of prior studies treating cultural disparities as static, we employ dynamic models to capture cultural differences over 2001-2021 with its 44 key trading partners. We incorporate Hofstede's six cultural dimensions and apply both linear and non-linear models. Our findings show a consistent negative effect of cultural distance on China's trade. The non-linear analysis uncovers a S-shaped curve relationship, highlighting the subtle influence of cultural differences confirmed by robustness tests in export and import trades. We argue that the impact of trade tensions can be lessened by aligning with the evolving nature of consumer preferences and psychological factors.

Citation

YU, B., ZHONG, X., GHIMIRE, B. and SAPKOTA, N. 2025. When trade meets tradition: unpacking cultural differences and their impact on China's international trade. International review of financial analysis [online], 106, article number 104488. Available from: https://doi.org/10.1016/j.irfa.2025.104488

• Journal Article Type: Article
• Acceptance Date: Jul 30, 2025
• Online Publication Date: Aug 12, 2025
• Publication Date: Oct 31, 2025
• Deposit Date: Aug 7, 2025
• Publicly Available Date: Feb 13, 2027
• Journal: International review of financial analysis
• Print ISSN: 1057-5219
• Publisher: Elsevier
• Peer Reviewed: Peer Reviewed
• Volume: 106
• Article Number: 104488
• DOI: https://doi.org/10.1016/j.irfa.2025.104488
• Keywords: China; Consumer preferences; Consumer psychology; Cultural distance; Gravity model; Poisson pseudo maximum likelihood; Trade
• Public URL: https://rgu-repository.worktribe.com/output/2967362