Does the China-Europe Railway Express attract cross-regional investment? Evidence from Chinese firms

This paper examines whether the opening of the China-Europe Railway Express (CRE) affects firms’ cross-regional investment. Using subsidiary-level data of Chinese listed firms from 2003 to 2020, we construct a firm-destination city-year panel and find that CRE openings significantly increase firms’ subsidiary establishment in connected cities. Mechanism analyses suggest that the CRE promotes firms’ cross-regional investment primarily by improving access to European markets and enhancing cross-border supply-chain efficiency. The effect is stronger for export-oriented firms and is more pronounced in coastal cities and cargo-origin hub cities with higher logistical importance. Evidence from textual classification of subsidiary business scopes further shows that the CRE has a stronger effect on embedded-oriented subsidiaries engaged in production, R&D, and manufacturing than on transit-oriented subsidiaries engaged in trading, logistics, and warehousing. Moreover, the investment response is amplified in cities with stronger industrial agglomeration and higher levels of marketization, highlighting the role of local absorptive capacity. Overall, this paper provides firm-level evidence that cross-border transport infrastructure can reshape firms’ spatial organization layout, and that the related investment exhibits certain features of organizational embeddedness rather than being limited to transit functions.