| In the filed of foreign direct investment (FDI) , the flight of pollution intensive industries has always been a sensitive topic. In recent years, with the increase of FDI inflows to China, while the economic contribution of FDI has been more and more recognized by the public, FDI is also considered as playing a negative role in host country's environment. As the most important theory in this discussion, Pollution Haven Hypothesis constitutes the basic explanation for the shift of pollution from developed countries to developing ones. However, through the spill-over of environment technology and learning-by-doing effect, FDI can not only bring the potential threat of becoming Pollution Havens, but also some positive effect, called Pollution Haloes. Given the complicated relationship between FDI and environmental protection, the thesis tries to build a comprehensive analysis structure to identif the effect of FDI on China's environment protection, covering macro-economic, regional-economic and micro-economic level, which takes kinds of factors into consideration, such as relative industry advantage, regional differences, environmental regulation policy, corporation management strategy and so on.Our analysis shows that, so far there has been no evidence to support the flight of pollution intensive industries into China. Given China's overall industry structure, foreign enterprises are investing in a much cleaner manner. Moreover, the main reason for foreign investors to choose China as investment destinations lies in the positive expectations for China's economic growth, not to make use of the cost saving from low environmental standards. So Pollution Haven Hypothesis does not hold for China. At the same time, the potential Pollution Halo Hypothesis is still not obvious in China, either. China's low environmental requirements and undeveloped green market response could not provide enough pressure for multinationals to implement environmental management strategy of high quality to improve their overall environmental performance.According to the above, this thesis is divided into six chapters. In Chapter 1, we put forward the background and necessity for doing this research. Related subjects are defined and basic analyzing methodology is introduced. In Chapter 2, through literature review around Pollution Haven Hypothesis and Pollution Halo Hypothesis respectively, we summarize the main achievements of existing research, therefore to find the points remaining to improve in further study. Chapter 3 to Chapter 5 is the core of this thesis, in which we do empirical research from three levels, covering the macro nation yard level, regional level and micro enterprise. In Chapter 3, we use both absolute measurements and relative measurements to analyze the transformation in the structure of pollution intensive industry in China. Our analysis proves that the gathering in pollution intensive industries (PIIs) is not identical for FDI. Given the considerable shares for China's pollution intensive industries in general, the industry structure of FDI is more environmental friendly. In Chapter 4, the basic methodology is to do Co-integration test to analyze the relationship between FDI and China's environment regulation by dividing the whole country into two regions, the east part and middle-west part. It proves that in choosing China as the investment destination, foreign investors have not put much importance on the cost savings from China's relative low environmental regulations but all out of the positive expectation about China's development in future. At the same time, we also find FDI seems to already bring some Pollution Halo effect to China. In Chapter 5, we mainly use investigation summary about the environmental management strategy of multinationals in China to identify the existence and power of Pollution Halo effect. And in Chapter 6, we put forward enforceable suggestions for the government and the corporations to realize the harmonious development of environment and economy.
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