The impact of outward foreign direct investment on carbon productivity: internal mechanisms and China’s experience

Abstract

ABSTRACT In the context of the expanding scale of China’s outward foreign direct investment (OFDI), it is crucial to study the economic and environmental benefits of OFDI in the home country. Given the lack of in-depth research on this topic in the previous literature, this paper attempts to fill this gap. Based on the panel data of 30 Chinese provinces from 2006 to 2020, this paper conducts an in-depth study on the relationship between OFDI and carbon productivity and its influence mechanism from the home country’s perspective. The results show that there is a significant positive correlation between OFDI and domestic carbon productivity, indicating that OFDI can reduce CO2 emissions while driving economic growth. OFDI has an indirect impact on carbon productivity in the home country through the paths of industrial structure upgrading, green technology innovation and energy utilization efficiency. The financial development scale has a single threshold effect on OFDI’s influence on domestic carbon productivity. Additionally, foreign direct investment (FDI) positively regulates the relationship between OFDI and domestic carbon productivity. Based on the above results, relevant policy suggestions are put forward to provide useful reference for China to achieve low-carbon development.