Study on the Environmental Impact of Foreign Direct Investment on China

Author:Wu Xin Ke

Supervisor:zhou jin sheng


Degree Year:2019





In recent years,China has been the developing country that makes the most use of Foreign Direct Investment(FDI)for many years.FDI plays an indispensable role in China’s economic development.In March 2019,the Second Session of the 13 th National People’s Congress passed the Foreign Direct Investment Law,which shows that our country attaches great importance to foreign investment in China.It will also continue to encourage foreign investment in China.The scale of foreign investment is likely to continue to show an upward trend in the future.However,everything has its two sides.FDI brings sufficient funds,advanced technology and mature management experience to our country.At the same time,it may also aggravate the environmental pollution in our country,especially the ecological environment in some areas with weak environmental carrying capacity.In view of the above realistic background and the increasing attention paid by the Party and the government to the ecological environment,it is of great significance to study the impact of FDI on the environment of our country.At present,researches on the impact of FDI on China’s environment mostly focus on the examination of the relationship between the two,that is,whether the FDI on China’s environment brings a "pollution halo" or a "pollution heaven" in terms of its impact.Besides,researches on the mechanism of FDI’s impact on China’s environment are not thorough enough and relevant empirical examinations are not comprehensive enough.Moreover,there is currently no research to comprehensively examine the spatial spillover effect and threshold effect of FDI’s impact on China’s environment.Therefore,this paper attempts to carry out the relevant researches from the following two aspects: first,through summarizing the relevant literature at home and abroad,based on the relevant classical theories,this paper draws on the general equilibrium principle to analyze how FDI impacts on China’s environment.On this basis,this paper builds a relatively reasonable spatial econometric model by combining EKC and related control variables,and also builds a threshold model with environmental regulation as the threshold variable;Second,by referring to the current situation and trend of FDI and industrial "three wastes",taking 30 provinces of China as the research object,and grouping tests of the three major economic zones in China’s east,west and central regions,using panel regression estimation,spatial econometric model and threshold model as research means,the impact of FDI on China’s environment is quantitatively examined.The main research work and innovative achievements of this paper are as follows:First,by using the exploratory spatial data analysis(ESDA),this paper examines the agglomeration and correlation of FDI and pollutant emissions in the spatial dimension.The results show that the two variables have significant spatial correlation and agglomeration.Second,spatial lag model(SLM),spatial error model(SEM)and spatial Durbin model(SDM)are respectively used to examine the impact of FDI on China’s environment and the impact of FDI from different sources on China’s environment.The results show that FDI has improved China’s environmental quality in general;variable industrial structure has negative impact on China’s environmental quality;environmental regulation has positive impact on China’s environment;FDI from four sources all has positive impact on China’s environment,but differs in impact intensity;FDI from Europe has the strongest positive effect on China’s environment.Through the effect decomposition of spatial Durbin model,it can be inferred that variables such as economic scale(GDP),FDI,investment in technology research and development,environmental regulation and population density have significant spatial spillover effects.On the other hand,through a systematic empirical examination of the environmental effects of FDI in different regions and different industries in China,we get the results showing that,in general,FDI has improved the environmental quality of China,but it has deteriorated the ecological environment in the western region of China.The environmental effects of FDI are subject to the threshold effect of environmental regulation,and there are optimal threshold intervals of environmental regulation in the "east,central and western" China.Within the optimal interval,FDI has the strongest positive effect on China’s environment.