Abstract: New economic geography, as an important tool to analyze the spatial agglomeration of firms and population, mainly focuses on topics as spatial agglomeration, market size, product variety, and trade cost, however, pays little attention to how these factors affect regional product quality. This paper takes "the Belt and Road" as the background, based on the Footloose Capital Model (FC), introduces quality to both consumption utility and production cost, and sets up a new economic geography model of the two regions under the DCI framework. The model derives the product quality determination equations of regional firms, and numerically simulates the influencing factors of product quality such as trade cost, substitution elasticity, and market size under an asymmetric structure. The result shows that even if there is no outward investment, by reducing trade cost along "the Belt and Road" and achieve free trade, it is also conducive to the improvement of product quality in the countries along "the Belt and Road". If capital can flow freely and there is outward investment, as trade costs along "the Belt and Road" decrease and trade freedom increases, the quality of products in large and small countries will converge, and welfare level in all regions will be improved. In addition, the overall increase in the size of a country's market expands the sales of firms and contributes to the improvement in the quality of products in their respective regions. Finally, the agglomeration force under the FC-Q model is smaller than under the traditional FC model. Product quality is a manifestation of the dispersion force.

Key words: New Economic Geography, Spatial Economics, Free Capital Model, Product Quality, Market Size, Trade Cost, FC-Q Model, The"Belt and Road" Initiatives, Bilateral Trade