From landlocked to linked: how the China–Europe Railway Express attracts foreign investment

Purpose International transportation networks are crucial to global capital allocation. This study aims to examine whether and how the China–Europe Railway Express (CR Express) attracts foreign direct investment (FDI) to connected Chinese cities. It identifies the causal effect of railway connectivity on FDI; investigates trade expansion, industrial upgrading and financial development as potential mechanisms; and explores variations across cities with different economic sizes, urban scales and industrial structures. Design/methodology/approach Using panel data for 285 Chinese prefecture-level cities from 2003 to 2022, this study treats the staggered launch of the CR Express as a quasi-natural experiment and applies a staggered difference-in-differences model to estimate its effect on inward FDI. Parallel trends test, instrumental-variable tests and other a range of robustness tests assess robustness and endogeneity. Mechanism and heterogeneity analyses examine transmission channels and differences across cities. Findings The research results show that the launching of the CR Express has significantly increased the inflow of FDI to cities along the route. The conclusion is still valid after many robustness tests. Mechanism analysis shows that the CR Express may influence FDI through three potential channels: expanding trade scale, upgrading industrial structure and promoting financial development. Further analysis found that this positive impact is more obvious in economically less-developed cities, service-oriented cities and small- and medium-sized cities. Originality/value This study extends FDI location theory by showing how cross-border railway connectivity can offset inland geographical disadvantages and reshape the spatial distribution of foreign investment. It broadens research on the CR Express beyond trade and productivity, clarifies the roles of trade expansion, industrial upgrading and financial development and provides practical insights for cities seeking to convert transport connectivity into sustainable investment attractiveness. Highlights