Impact of China’s OFDI on Green Total Factor Productivity of Countries along the “Belt and Road”

Abstract

FDI is an important channel for technical communication and a common method for pollution transfer. With the rapid growth in investment to the Belt and Road” region, how China’s OFDI affects the green total factor productivity of countries in that region is not only a common concern of the international community, but also directly determines whether the Green Belt and Road” initiative can be further advanced. In this paper, the directional distance function considering undesired output is used under the DEA framework, and the green total factor productivity of 56 countries in that region is measured by using the Global Malmquist-Luenberger productivity index. On this basis, the paper utilizes the two-way fixed effect model, quantile regression model and panel threshold regression model to test the effect of China’s OFDI on green total factor productivity of different countries. The paper concludes that: First, China’s OFDI has significantly promoted the growth of green total factor productivity in host countries, while the overall investment from other countries has significantly inhibited the growth of green total factor productivity in host countries. Second, by attracting China’s OFDI, absorbing and assimilating China’s advanced technologies, there has been a strong boost to the growth of green total factor productivity in the countries which rank the last 60% in the green total factor productivity; contrastively, for the top 40% countries, China’s direct investment has not promoted local green economic development significantly. Third, China’s OFDI has a threshold effect of economic scale and human capital on regional green total factor productivity, but the difference in infrastructure quality has not caused the nonlinear impact of China’s OFDI on the green total factor productivity of countries. Even so, promoting infrastructure construction will indeed help to strengthen the resource integration and accelerate the development of green economy in the Belt and Road” region, and this also reflects the value of the establishment of the Asian Infrastructure Investment Bank under the Belt and Road” initiative. To sum up, this research not only positively responds to the doubts about China’s investment motives, and dispels the anxiety” of countries along the line, but also lays the foundation for China to establish the image of a responsible investment entity.