China's rapid economic and political development has made it a key player in global trade, particularly with the Association of Southeast Asian Nations (ASEAN). The relationship between China and ASEAN is characterized by strong ties, geographic proximity (a land border of over 4000 km), cultural connections, and significant economic interdependence. Since the establishment of their partnership in 1991, and particularly after the creation of the China-ASEAN Free Trade Area (CAFTA) in 2010, bilateral trade has grown substantially, with China and ASEAN becoming each other's largest trading partners in 2020. Despite this generally upward trend (with notable dips in 2009 and 2016), the impact of fluctuations in bilateral political relations on trade flows remains an open question. This article addresses this gap by examining the impact of these fluctuations on trade between China and ten ASEAN countries from 2001 to 2020, utilizing high-frequency monthly data and a novel approach based on the GDELT database to measure changes in bilateral relations.

The relationship between international trade and political relations has been a subject of extensive scholarly debate. Realist theories posit that political relations determine trade levels, with strong relations promoting cooperation and weak relations hindering trade ('trade follows the flag'). Liberal theories, conversely, argue that trade fosters interdependence and reduces political friction. Existing research offers mixed evidence, with some studies finding a clear correlation between positive political relations and increased trade, while others demonstrate the negative effects of conflicts or specific political events (e.g., visits by the Dalai Lama). Previous studies, however, often lack high-frequency data, focus on historical examples (like colonial relationships), or concentrate on specific pairings (e.g., China-Japan or China-US). This study seeks to fill these gaps by analyzing the nuanced relationship between China and ASEAN using a comprehensive dataset and a novel approach to measuring bilateral political relations.

This study employs a gravity model of trade, a widely used econometric tool for analyzing trade flows, which is adapted to incorporate high-frequency monthly data and the novel use of GDELT data. The core explanatory variable is the fluctuation of bilateral relations, measured using the average Goldstein score (GS) from GDELT event data. The GS ranges from -10 (strongest conflict) to 10 (most active cooperation). To account for event frequency, the study weights the GS by the number of articles mentioning each event. The model distinguishes between China's one-way behavior towards ASEAN and ASEAN's one-way behavior towards China, allowing for a more nuanced analysis. Control variables include market size (log of average GDP), geographically weighted distance, population, shared border, similar legal systems, FTA membership, and APEC membership. The study uses panel data from January 2001 to December 2020 for China and ten ASEAN countries. To address potential heteroscedasticity and cross-sectional dependence, the study employs fixed effects and FGLS regression models, and robustness checks are performed using 2SLS, GMM, and PPML estimation methods. Additionally, the study calculates trade intensity (TI) and Hubness Measurement (HM) indexes to provide further insights into trade dependence and intensity.

The empirical findings strongly support the hypothesis that improved bilateral relations promote trade between China and ASEAN countries. The positive correlation between improved bilateral relations (as measured by the average Goldstein score) and bilateral trade volume is statistically significant across various model specifications. This effect is particularly pronounced on China's exports to ASEAN, with less significant effects observed on imports. The analysis of one-way behavior reveals that China's actions towards ASEAN have a more significant impact on trade than vice versa, suggesting that China's initiatives are a key driver of trade growth. Further analyses using the Trade Intensity (TI) index and Hubness Measurement (HM) index corroborate these findings. The TI index reveals high trade intensity between China and most ASEAN countries, exceeding expectations based on global trade shares. The HM index indicates that China's trade dependence is steadily growing with most ASEAN countries. Notable exceptions include Brunei, Laos, Cambodia, and Myanmar, suggesting there is significant room for further cooperation and development in trade relationships with these countries. Robustness checks using various econometric methods (2SLS, GMM, and PPML) consistently confirm these findings. The model also found that market size and geographic distance are significant determinants of trade, while factors such as shared borders and common legal systems have negative impacts. FTA membership is found to have a negative impact, suggesting that the existing FTA structures between China and ASEAN may require review and improvement to strengthen regional cooperation.

The findings suggest that strengthening bilateral and multilateral political relationships is crucial for boosting trade between China and ASEAN. China's proactive engagement and positive political attitudes towards ASEAN countries are a significant driver of increased trade volume, especially for Chinese exports. The relatively lower impact of ASEAN's one-way behavior suggests potential areas for further policy improvements to harmonize efforts and maximize mutual benefits. The consistent findings across different econometric models highlight the robustness of the results and confirm the important role of political relations in shaping trade flows. The study's results have significant implications for policymakers seeking to improve regional cooperation, suggesting a need for greater political dialogue, conflict resolution, and mutual understanding to maximize trade potential.

This study demonstrates the significant and positive impact of improving bilateral relations on trade flows between China and ASEAN countries. The findings highlight the importance of maintaining stable political ties, strengthening economic and political connectivity, and enhancing mutual trust to promote high-quality regional development. Further research could explore the specific mechanisms through which political relations influence trade, delve into the impact of specific events on trade flows, and examine the role of other factors such as the Belt and Road Initiative in shaping this relationship.

The study is limited to the period 2001-2020, which may not be fully representative of future trends. Data availability for some variables, particularly at the monthly frequency, poses challenges. While the study utilizes a comprehensive event dataset (GDELT), the reliance on media reports as a proxy for political relations may not fully capture the complexity of these interactions. Further, the gravity model used, while widely applicable, may not entirely capture the complexities of trade relationships. The study focuses primarily on the aggregate trade levels, and future studies could disaggregate the data to provide deeper insights at a more granular level.