The impact of city diplomacy on foreign direct investment: Evidence from international sister city diplomacy agreements

Bei He, Mingyue Tang and Aodi Wei

International Review of Economics & Finance, 2025, vol. 99, issue C

Abstract: International sister cities, as important channels for Chinese cities to engage in foreign exchanges, play a crucial role in national diplomacy. We examine the role of international sister city diplomacy in attracting foreign direct investment (FDI) based on panel data from 286 cities in China from 2010 to 2022. The results show that both the depth and breadth of international sister city development significantly promote FDI. This effect is more pronounced in large cities, cities with a higher degree of marketization, and cities with lower economic policy uncertainty. Mechanism analysis indicates that sister city diplomacy attracts foreign investment through increasing the output value of foreign-invested enterprises and promoting cultural exchange.

Keywords: International sister city diplomacy; Foreign direct investment; Output value; Cultural exchange (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:reveco:v:99:y:2025:i:c:s1059056025002394

DOI: 10.1016/j.iref.2025.104076

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