The impact of China railway express on foreign direct investment inflows in Chinese central and western cities

Abstract

Capital needs transportation channels. Following successful communication and cooperation with Central Asian and European states, the China railway express (CRE) has been built by central and western cities. This new international freight service will greatly enhance the transport conditions in the central and western cities. Therefore, it is necessary to conduct an in-depth analysis of the impact of CRE operations on foreign direct investment (FDI) flows in the central and western regions. For analyses, a panel data of 152 Chinese cities from 2008 to 2020 is used and staggered difference in differences (DID) model is applied as a quasi-natural experiment. The results demonstrated that the operation of the CRE had a positive and significant impact on FDI inflows in the central and western cities, particularly in western cities, large cities, and non-resource based cities in China. Mechanism analysis shows that CRE operations can enhance the ability to attract foreign investment in the central and western regions through the promotion of industrial agglomeration and the expansion of market size. Therefore, the government should actively optimize the layout of CRE transportation routes and establish an inter-regional coordinating mechanism for freight sources, thus allowing the radiating effect of CRE central cities to reach out to peripheral cities.