Analysis On The Environmental Effect Of FDI In Yangtze Delta

As 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. Yangtze Delta absorbs the most FDI in China and the FDI entry has been increasing greatly since the reform and openness. At the same time, the environment of Yangtze Delta is worsening intensely. Based on this phenomenon, this paper studies the FDI-emission nexus in Yangtze Delta and explores how FDI affects the environment.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; another is indirect impact, which means FDI affects environment by the intermediation of scale, composition and technique effects. This paper estimated the economical cost of direct impact of FDI in Yangtze Delta by production-consulting method, constructed a system of simultaneous equations to study the environmental impact of FDI by decomposing it into scale, composition and technique effects, and also investigated the composing of pollution-intensive industries in Jiangsu province. Result shows that, the impact of FDI on economic growth increases emission; composition effect and technique effect decrease emission respectively by reducing the proportion of pollution-intensive industries and introducing into advanced technique and equipment of emission control.