Environmental Impact Analysis Of Foreign Direct Investment On China

Since the 1990s, with the further development of world economy, global environmental problems become more and more prominent, which is a serious threat to human survival and sustainable development. Because of the differences in the international division of labor, the developed countries may transfer environmental pollution industries to developing countries through the international direct investment, international trade and transfer of technology. China, as the world’s largest developing country, is much favored by international capital since the reform and opening up. China as developing countries attracts the largest scale foreign direct investment in 22 consecutive years, which have solved the dilemma of the lack of technology and capital at the beginning of the reform and opening up. As to the international division of labor, our country is at the end of the global value chain links. Economic growth depends on excessive consumption of energy, which is at the cost of the ecological environment. In result China’s environmental problems become increasingly prominent. This can not help but cause people to think about the reasons behind them, one of the most controversial problem is the relationship between the capital and the environment.The relationship between foreign direct investment and environmental issues has become a hot topic of current research. Most studies focus on the empirical analysis, and the combination of theoretical and empirical research is insufficient. In this paper, on the basis of theoretical analysis, we study the influence of FDI on our country environment from the pollution intensive industry, and the specific content of this article mainly has the following several aspects:1, Based on a comprehensive study of literature, we sort out the basic theory of the relationship between FDI and the environment firstly, and then explore the motivation of foreign direct investment as well as the causes of the environmental problems generated by FDI.2, Combined with the specific official statistics, we respectively analysis the utilization and industry distribution status of FDI, and describe the pollution situation in depth.3, Reference on Copeland and Taylor’s research methods that exports influence environment via three channels, we build a theoretical model of general equilibrium. From the analysis of the theoretical model, we reveal that FDI influences environmental pollution by economies of scale, structure effect and technology effect mechanisms.4, we establish a set of simultaneous equations which closely link the theoretical analysis rather than a single equation. As the relationship between the economic development and the environment is an organic whole interaction, it is biased that we unilaterally investigate the impact of FDI on environmental pollution or the environmental impact regulations have on the foreign direct investment. FDI will affect the environmental effect through various channels. We select 19 pollution-intensive industry panel data from 2001 to 2013, and research the empirical analysis of the FDI effects on the environment with "Three Stage Least Square" method, and have empirical test to verify the "Pollution Haven Hypothesis". In order to ensure the reliability of conclusions, we have sensitivity analysis that we use the industrial waste gas and industrial waste water to replace the explanatory variables, the result is consistent with the conclusion above. According to empirical results we have the following conclusions:To some extent, the inflows of foreign direct investment attributes the deterioration of the environment, it mainly due to that the positive effect of technology spillover brought by foreign investment is less than the sum of negative scale effect and structure effect. China’s environmental regulation has a significant negative effect on foreign direct investment, it indicates that China becomes a "pollution haven" countries.According to the results of empirical analysis, in order to make better use of foreign capital and improve China’s ecological environment, we propose the following policy recommendations:1, optimize the utilization of foreign investment and improve the quality of foreign direct investment.2, focus on independent research and development, improve the technical level.3, strengthen the responsibility of local governments, guarantee that local governments play a supervisory function.4, strengthen the environmental legislation, improve the institutional system for environmental protection.5, strengthen the domestic technology absorption capacity, display the positive spillover effect of foreign direct investment.