Analysis of the Effect of China’s Regional FDI Inflows on Environmental Pollution

Abstract

Purpose Since China’s reform and opening up policy, foreign direct investment (FDI) in China has gradually increased, and its economic and environmental impact has increased. Therefore, the study of FDI’s environmental impact while promoting China’s economic development is a subject of note for sustainable policy. Design/Methodology/Approach In order to analyze this issue, this study constructed a panel data model using data from 30 regions in China from 2000 to 2015, and set up four types of models that consider regional differences, and targeting three pollutants. The effect of FDI on environmental pollution was analyzed and “Environmental Kuznets Curve” (EKC) was tested. Findings According to the results of the study, EKC theory was found to be consistent between GDP per capita in each region of China and sulfur dioxide as well as industrial wastewater emissions, but the EKC hypothesis was not satisfied due to the positive correlation of industrial waste generation. In addition, it was estimated that the emission of pollutants increases as the proportion of secondary industries in all three pollutants increases, including sulfur dioxide, industrial wastewater and industrial waste. Research Implications The results of this study show that unlike most previous studies, the effect of the “Pollution Heaven Hypothesis” and FDI on environmental pollution differs by pollutant and by region. This shows that China’s environmental policy is improving. The results of this study show that changes in China’s environmental policies that consider environmental quality are desirable, but are not yet perfect, so sustainable policies that consider environmental quality improvement should continue in the future.