Analysis On The Environmental Effect Of FDI In Hu Nan Province

Since the mid-twentieth century,with the development of the globalization of economic, the acceleration of international capital flow and global environment deterioration, more and more attention is being paid to the FDI-emission nexus. The potential association between FDI and environment has been emerging increasingly. After China joined into the WTO, the scale of FDI expands unceasingly which Hunan province has under the controlling of the industrial gradient shift rule, FDI has promoted the economic growth rapidly. As the growing of the economy, the pollution of environment of Hunan province became seriously .Based on this phenomenon, this paper studies the FDI-emission nexus in Hunan province and how FDI affects the environment.Because that people concerns on the environmental pollution of the eastern part for a long time, but concerns less on the same problem of central and western regions, so this paper test the existence of the environmental effects of Hunan province first The results prove that the environmental pollution problems have begun to appear in Hunan province which exits in eastern part of china. The inter-correlation between FDI and environment is very complex. The impact of FDI on environment can be captured from two channels: one is direct impact, which means the production activities of FDI produce emission; anther is indirect impact effects .This paper constructed a system of simultaneous equations to study the environmental impact of FDI by decomposing it into scale, composition and technique effects. Result shows that, the impact of FDI on economic growth increases emission; Composition effect increase emission too, but technique effect decrease emission by reducing the proportion of pollution-intensive industries and introducing into advanced technique and equipment of emission control.In order to analysis the environmental effects of FDI for Hunan province more perfectly; the article compared the environmental effects of FDI of Hunan province and Guangdong province too. The results show that there are both differences on the direct effects and indirect effects of FDI in two provinces. Because that the level of economic development, industrialization and the level of FDI distribution industries are different.Finally, according to the empirical analysis results of the environmental effects of FDI in Hunan Province and the regional comparative analysis results of the environmental effects of FDI of Hunan and Guangdong province, this paper think that it should coordinate the relationship between FDI and the environmental pollution for Hunan province, through adjusting the industrial structure and foreign investment structure, and through raising the environmental awareness, improving the environmental protection policy and developing the circular economy vigorously, so that to promote the economic and environment development harmoniously.