The Empirical Analysis Of Pollution Haven Hypothesis In China

Since 1970s, the relationship of economy growth and environmental protection has been gotten more and more attention. sustainable development began to gain traction. For China, foreign direct investment (FDI) has become an integral part of China's economic development from reform and opening up. It has produced a wide range of positive effects on China's economic growth, structural upgrading and enhancing the international competitiveness. In the meantime, China's environment has also undergone a process of deterioration, therefore many studies have begun to explore the relationship between the foreign direct investment and environment, and there has a controversial topic of whether China has become the "pollution haven" of foreign direct investment. "Pollution haven hypothesis" first proposed by the foreign scholars in the 1970s.The basic idea is:if a country's environmental regulations are quite stringent, then the country is lack of environmental elements; and if a country's environmental regulations less stringent, then the country is rich on environment. Some industries are sensitivity of the environmental regulations, it is called pollution-intensive industries. Based on profit maximization and cost minimization, corporations will locate to the countries which have relatively loose environmental regulation. Generally speaking, developed countries has strong awareness of environmental protection, environmental resources are relatively poor, while developing countries tend to adopt a relatively loose environmental control to developing economy. So a large number of pollution-intensive industries have shifted to developing countries and ultimately make developing countries to become "pollution havens." This paper is based on China's foreign direct investment and environmental control, by modeling the data in recent years, attempting to verify the existence in China of "pollution haven hypothesis" phenomenon.This paper has four parts. The first part is introductory section, it introduce the background of the article and arrangements. The second part is theory and literature review. In general, these theories don't mention the environmental factors in the status of foreign direct investment, they are all from an economic point of view to consider foreign direct investment. Next, the literature review shows that the results of empirical research have no common conclusion about this question. The third part is the empirical part of this article. Chapterâ…¢analyzes the distribution of pollution-intensive industries of foreign direct investment in China, as well as the distribution of changes in China in recent years. The analysis shows that the structure of foreign investment in pollution-intensive industries is better than China's own industrial. In general, the distribution of foreign is cleaner than the Chinese industries, however, the proportion of foreign investment in China's pollution industry is gradually increasing in recent years. Chapterâ…£examines the situation of China's environmental regulations, it is also equal to the China's environmental protection situation. From the data analysis and the strength of China's environmental protection, it is concluded that China's industrial pollution is not deterioration with the rapid economic growth, it remains a relatively stable condition, the third and forth chapters analysis show that foreign pollution-intensive industry didn't shift to China in large scale. Environmental regulations in China is tending more and more stringent. The fifth chapter is the part of model, according to the host country location advantages to attract foreign capital theory, I selected China's FDI location advantage factors and the FDI data to establish equations to verify whether the environmental controls of China played important position in FDI location choice. The results showed that the effect of environmental is smaller to the other traditional factors. This illustrates that China's environmental control on the impact of foreign direct investment is small, so foreign investors to invest in China not because China's relatively less strict environmental regulations, and does not view China as their transfer of pollution-intensive industry. This article believes that the cost of enterprises is the most important reason trigger the FDI, but this study shows that environmental costs has little effect on foreign capital inflows.