Abstract
ABSTRACT This study examines the impact of international friendship city development on foreign direct investment (FDI) using panel data of 290 Chinese cities from 2004 to 2019. Results show that the extent of local government involvement in developing international friendship cities plays a role in facilitating FDI. Regarding the underlying mechanisms, friendship city relations foster FDI through improving the business environment for foreign investors and promoting cultural exchange. This study provides new empirical evidence that diplomatic relations foster FDI.
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