Soft Power in Trade: Quantifying the Impact of Confucius Institutes on China's Exports

ABSTRACT This paper investigates the role of Confucius Institutes (CIs) as a form of China's cultural diplomacy and their impact on international trade, particularly exports. Using a gravity model, we analyze data from 1990 to 2019 across countries, finding that the presence of CIs significantly boosts China's exports. Robustness checks confirm this effect across various specifications, including imports and sector‐level data. Mechanism analysis reveals that CIs enhance China's image, increasing trade by fostering positive perceptions abroad. The study further identifies pronounced trade effects in high‐income nations, and regions with shorter cultural distance from China. Our findings suggest that cultural output via Confucius Institutes not only advances China's soft power but also serves as a strategic tool to promote trade globally, with differentiated goods benefiting the most.