Research On The Impact Of International Sister City Relations On China’s Outward Foreign Direct Investment

As the largest source of outward foreign direct investment(OFDI)from emerging economies,China has become the world’s leading investor through active cross-border investment.However,compared with China’s fast-growing OFDI,the effectiveness of Chinese enterprises "going global" is not ideal.Therefore,how to improve the overall level of outward foreign direct investment from "going out" to "going in" will be directly related to the development of China’s economy.In the context of the implementation of the national "the Belt and Road",international sister city relations have become one of the important forms and means of China’s urban diplomacy.Taking the international sister city relationship as the research starting point,this paper organically combines the three perspectives of political mutual trust,cultural exchange and investment cooperation,in order to explore whether the international sister city relationship can be used as a new path to promote th e re growth of China’s outward foreign direct investment.Based on the matching city host data of China International Sister Cities summary and China global investment tracking data from 2005 to 2019,this paper uses the Difference-in-Differences model to study the investment promotion effect of international sister city relations.Through empirical analysis,it is found that the investment promotion effect of international sister city relations is significant.Under the control of the host country’s econom ic system environment,host country’s natural resource endowment,host country’s market scale,host country’s economic development level,urban trade scale and urban wage level,the international sister city relationship will significantly increase China’s OFDI increment in the host country by about 16%.This result is still robust when using Tobit model,considering the impact of financial crisis,PPML model and PSM-DID method.In addition,through the intermediary effect test,this paper confirms that international sister city relations affect outward foreign direct investment through three intermediate channels: strengthening cultural exchange,reducing the institutional risk of the host country and enhancing political mutual trust between the two countries,and the promotion effect of international sister city relations on China’s foreign direct investment shows multi-dimensional heterogeneity,This promotion effect is not much different between countries along the the Belt and Road and non the Belt and Road countries,and is more significant in developing countries and countries with relatively poor institutional environment.However,in terms of domestic regional distribution,this investment promotion effect is only more significant in the eastern region.The conclusion of this paper makes a preliminary exploration on the role of international sister cities in transnational exchanges,and also provides reasonable suggestions and references for their promotion of international investment in the future.