Abstract: The construction of digital infrastructure, as a significant driver of investment growth in the context of the current digital economy era, holds great importance for China in utilizing foreign capital to maintain stable stock and promote growth. Based on the panel data from Chinese prefecture-level cities and municipalities from 2006 to 2022, this study measures the level of urban digital infrastructure construction by using principal component analysis method, then further investigates the impact and underlying mechanisms of digital infrastructure construction on foreign capital inflows to cities. The results indicate that digital infrastructure construction has significantly promoted foreign capital inflows to cities, and this conclusion remains robust after undergoing endogeneity analysis and other robustness checks. In terms of mechanism, accelerating industrial structure optimization and upgrading, promoting technological innovation, and enhancing financial development are key channels through which digital infrastructure construction facilitates urban foreign capital inflows. The heterogeneity analysis reveals that the promotion effect of digital infrastructure construction is more pronounced for small-and medium-sized cities and is particularly effective in tapping the investment potential of central and western cities. Further analysis indicates that digital infrastructure construction exhibits positive spatial spillover effects on urban foreign capital inflows, although these effects diminish with increasing geographical distance and strengthened trade barriers between administrative regions. Based on these findings, while comprehensively developing digital infrastructure, the government should accelerate industrial structure adjustments, promote collaborative innovation between domestic and foreign enterprises, and strengthen inter-regional coordinated development, thereby providing a more stable and long-term environment for China to utilize foreign capital.

Key words: digital infrastructure construction, foreign direct investment, spillover effect, spatial attenuation boundary