The Foreign Direct Investment And Environmental Pollution In China

With the consciousness of environment protect intensified, Capital flow and the problems of environment protection become more and more important. Foreign Direct Investment (FDI) flows into developing countries, on one hand, it may promote the looming of the domestic country's economy, at the same time, it also pays much pressure on environment. Since the reform and opening up, there are tremendous investments from foreign countries swarming into China, unfortunately, it is apparent that the quality of environment in our society falls sharply.On the basis of the former researches in both domestic and abroad, I will employ theoretical analysis and empirical analysis to further the research on this field. The thinking route of this paper is: at first I will construct a Hecksche-Ohlin model, which contains the environment factor, the results of which shows that has been widely tested by using new econometric estimation tools such as unit root test, co-integration, Granger-causality test, VAR estimation as well as simultaneous equation estimations. Finally, series of policy suggestions are also provided, including: tax restraint, law guiding and administrative order etc. We hope that with the adoption of these measures to stimulate the harmonious relationship between them, China will head its path in the way of sustainable development.The innovation of this paper is that I induced and tested the operation mechanism between the FDI and environment: the environment quality is influenced by the FDI through the channel of scale effect, structure effect and technology effect. However, they have different means to the environment protection. Normally, in the developing countries, Scale effect is negative to the nature, but for the structure effect and technology, they are variable. In China, it's tested by the paper that the structure effect also plays a negative role to the environment, but it's totally opposite for the technology effect. To further ahead, this paper also use IRF to perform the shock response between the FDI and environment, the results of which tell us that they are interact ional.