Railway Logistics and its Impact on Processing Trade: Evidence from Prefecture-Level Cities in China

Railway networks play a vital role in interregional and international trade. This paper investigates the causal effect of railway logistics, specifically the China-Europe Railway Express (CRE), on processed trade in prefecture-level cities in China and examines whether its impact varies with cities’ industrial structures. Using a unique dataset of detailed processed trade records for 261 prefecture-level cities from 2003 to 2022, we employ a difference-in-differences approach to show that the opening of CRE routes significantly expands processed trade, particularly in manufacturing-oriented cities relative to service-oriented ones. The results remain robust to policy- and pandemic related shocks, and alternative specifications. These findings underscore the importance of strategic transportation infrastructure in integrating cities, including inland hubs, into global value chains. Policymakers should therefore prioritize railway network improvements in manufacturing hubs to enhance their participation in processed exports and global trade.