Trade Transfer, FDI And Pollution In China

This essay is based on theories such as the Environmental Kuznets Curve (EKC), pollution heaven hypothesis to research on the trade and environment problem in China focusing on the perspective of trade transfer and its impact on pollution as well as the role of FDI in the process. With theoretical analysis, it is proved that trade transfer and pollution are reciprocal causation, the increase of export amount and embodied pollutants emissions and resources consumptions result to pollution transfer while the pollution heaven phenomena arise from the low environmental standards in China has attracted more polluting industries to shift to China and hence cause the trade transfer effect. Also, it is proved that FDI has played the role of an important intermediary between trade transfer and pollution transfer. In addition, through cointegration test, error correction model and Granger causality test, it is found that there is a long term positive equilibrium between the trade transfer among China, Japan, and Korea and the pollution in China, and it is also found that these two factors are reciprocal causation. So, the surplus of China's exports embodied with deficit of pollutants emissions, and China should change its export-orient economic pattern which has cost a lot on domestic environment and develop a sustainable pattern for the country's export sector by enhancing the industrial structure and expanding the horizontal of international environmental cooperations.