Trade value of international friendship: Evidence from foreign exchange activities of Chinese cities

International friendship cities can be vital platforms for enhancing global connections and boosting exports. This study examines the trade value of international friendship cities and investigates the underlying mechanisms that generate this value. Our findings reveal that establishing such links leads to an average 4.6% increase in exports between the cities involved and their partner cities' countries. Each additional international friendship city generates an average 6.1% growth in exports with sustained, long-term benefits. The export-promoting effects of international friendship cities exhibit heterogeneity across different types of firms, with stronger effects when a city pairs with economically advanced partners. Our findings also show that international friendship cities promote exports through four key mechanisms: improved information exchange, increased bilateral investment, enhanced cultural identification, and reduced trade costs. We also find that international friendship cities significantly improve both the duration and survival probability of increased exports and have a pronounced promotional effect on the intensive margins of those exports. International friendship cities established by provincial capitals generate spillover effects, allowing firms in peripheral cities to indirectly access export markets through these international linkages. This study provides compelling evidence of the trade value of international friendship cities and offers valuable insights for local governments seeking to expand international engagement and export promotion.