Resources Science ›› 2019, Vol. 41 ›› Issue (11): 2043-2058.doi: 10.18402/resci.2019.11.08

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Environmental effects of bidirectional FDI in China

HAN Yonghui1,2, LI Ziwen3, ZHANG Fan1, SHEN Chen4()   

  1. 1. Guangdong Institute of International Strategy, Guangdong University of Foreign Studies, Guangzhou 510420, China
    2. Institute of World Economy and Politics, Chinese Academy of Social Sciences, Beijing 100732, China
    3. School of Finance and Investment, Guangdong University of Finance, Guangzhou 510521, China
    4. School of Economics and Management, Zhejiang University of Science and Technology, Hangzhou 310018, China
  • Received:2019-03-25 Revised:2019-07-22 Online:2019-11-25 Published:2019-12-03
  • Contact: SHEN Chen E-mail:shenchen106@126.com

Abstract:

China’s inward foreign direct investment (IFDI) and outward foreign direct investment (OFDI) play an important role in the strategies of building a high level and open economy. Based on the present situation of China’s dual identity as the host country and home country, this study took the time-series data of bidirectional FDI and pollutant emission from 1995 to 2015 as a sample and used threshold cointegration, error correction model, and pulse response function to test the relationship between China’s bidirectional FDI and environment quality. The results show that: (1) In the short term, IFDI promoted the improvement of environment, but OFDI had an inhibitory effect on the environmental improvement; (2) In the long term, IFDI inhibited the continuous improvement of the environment, while OFDI had a significant effect on promoting the environmental improvement; (3) From the perspective of dynamic impact, bidirectional FDI will transfer their external shocks to the change of environment quality, but the response to IFDI is negative, and the response to OFDI is positive. (4) After differentiating labor and resource-intensive industries from capital and technology-intensive industries, bidirectional FDI shows obvious heterogeneous effects across industries in both the short term and the long term. In the new era of development, it is of great theoretical and practical significance to clarify the relationship between bidirectional FDI and environment in order for China to deepen the overall opening-up strategy, formulate the international investment policy of “for our use,” coordinate the development of “bringing in” and “going out,” and realize sustainable green development and build ecological civilization.

Key words: inward foreign direct investment (IFDI), outward foreign direct investment (OFDI), environmental effect, cointegration analysis, error correction model, China