Does “Stabilizing FDI” enable a low-carbon transition in Chinese cities?

Abstract

The stable introduction and utilization of foreign investment is a guarantee for China's further opening up, and plays a significant role in urban carbon emission reduction within the framework of carbon peaking and carbon neutrality strategies. By calculating the index of Foreign Direct Investment (FDI) stability and utilizing panel data of 274 Chinese cities spanning from 2006 to 2019, this article systematically investigates the impact of FDI stability on urban carbon emissions. The results indicate that upgrading FDI stability can effectively reduce urban carbon emissions. This effect is particularly pronounced in cities with lower rationalization degree of industrial structure, higher financial investment in technology, higher foreign capital dependence and cities rely on resource-based industries. The upgrading of human capital structure, digital transformation and green technology innovation are the intermediary mechanism for FDI stability to have a carbon emission reduction effect. While the incentive effect of FDI stability on “independent innovation” is relatively lower compared to “imitation innovation”. Additionally, there is a delay in the impact of innovation quality and urban digital transformation. Further research suggests that stable FDI widens the carbon emission gap between regions, leading to an obvious “Matthew effect”, which could be effectively corrected by implementing reasonable environmental regulation and improving FDI quality.