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

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  • He, Bei
  • Tang, Mingyue
  • Wei, Aodi

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.

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  • He, Bei & Tang, Mingyue & Wei, Aodi, 2025. "The impact of city diplomacy on foreign direct investment: Evidence from international sister city diplomacy agreements," International Review of Economics & Finance, Elsevier, vol. 99(C).
    • Handle: RePEc:eee:reveco:v:99:y:2025:i:c:s1059056025002394
    DOI: 10.1016/j.iref.2025.104076
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