Impact of China's outward foreign direct investment on green total factor productivity in "Belt and Road" participating countries: a perspective of institutional distance.

Abstract

The "Belt and Road" must be built not only as a road to prosperity but also as a green road. However, as China's outward foreign direct investment (OFDI) in "Belt and Road" participating countries has continued to increase, "China's pollution transfer" has also been wildly rendered. This article uses data from 21 European countries participating in the "Belt and Road" Initiative from 2009 to 2018. After calculating the institutional distance between each sample country and China using the Kogut-Singh index, this article focuses on using the threshold regression model to study the relationship between China's OFDI and the host country's green total factor productivity (GTFP). The empirical results prove that China's OFDI is green rather than accompanied by pollution transfer, which can promote GTFP in countries participating in the "Belt and Road" Initiative. However, this positive effect will gradually weaken as political institutional distance and economic institutional distance increase. Moreover, the expansion of OFDI can reduce the impact of institutional distance on GTFP in "Belt and Road" participating countries. Therefore, for "Belt and Road" participating countries that differ greatly from China in terms of their institutional environment, cooperation with China should be strengthened to reduce the impact of bilateral institutional differences.