The Impact of the China Railway Express on FDI Inflows in Chinese Prefecture-level Cities

Abstract

Operating the China Railway Express (CRE) is a primary strategy for promoting international trade and investment between China and Europe. Since the inception of the CRE in 2011, the number of operational routes and connected cities has steadily increased. This study investigates the impact of the establishment of the CRE on foreign direct investment inflows in Chinese prefecture-level cities. To perform our analysis, we used panel data of 250 cities in China from 2004 to 2018, and applied the difference in differences (DID) model as a quasi-natural experiment. The results demonstrated that the operation of the CRE had a positive and significant impact on urban FDI inflows, particularly in small and medium-sized cities, low-income cities, and inland cities in China. The robustness of the results was verified using the DIDM and PSM-DID methods.