Effect on high-quality economic development of foreign direct investment in China from the triple perspectives of financial development

Abstract

High-quality economic development focuses on achieving effective qualitative improvement and reasonable quantitative growth in the economy, which is the essential way for China to achieve sustainable development. This paper aims to investigate the role of financial development in the impact of foreign direct investment on high-quality economic development. GDP and green total factor productivity are used to measure the quantity and quality of economic development, respectively. We construct benchmark panel regression models, nonlinear interaction term models, and panel threshold models to examine the threshold effect of FDI on high-quality economic development based on the scale, structure, and efficiency of financial development. A series of tests are conducted to check the robustness of the estimates. Our results show that green total factor productivity in China is primarily driven by green technology progress. Additionally, foreign direct investment has a positive impact on China's high-quality economic development, with a threshold effect and nonlinear characteristics. Specifically, the scale of financial development affects the influence of foreign direct investment on the quantity of economic development, while the efficiency of financial development affects its influence on the quality of economic development. Furthermore, the structure of financial development affects both the quantity and quality of economic development. This study presents novel findings that contribute to understanding the role of financial development in the impact of foreign direct investment on high-quality economic development. Likewise, our research has implications for achieving high-quality development. The introduction of foreign direct investment under the high-quality development of the economy should comprehensively consider financial development.