Analysis Of The Impact Of Environmental Regulation On FDI

Since the reform and opening up of China, economy has been rapidly developing, and China has become one of the most country to attract foreign direct investment due to the market-oriented economic reform. However, China’s environmental situation, at the same time, is also deteriorating. With the growing awareness of foreign direct investment and concern of global environmental pollution, the relationship between FDI and environmental regulation caused the concern of the’international academic community, and has become a hot issue in depth research.This paper, based on foreign direct investment theory and environmental regulation theory, mainly combining theoretical and empirical analysis, and using extended-related theoretical model, analyses the impact of environmental regulatory system on FDI in two angle from host country to investment source country, and makes recommendations of the environmental policy formulation and investment based on the conclusions.To begin with, this paper, by using Multiple linear regression model and Granger causality test model, analyses the impact of environmental regulation and other variables on FDI from the perspective of the host country, and concludes:the impact of environmental regulation on FDI is not significant, and there is no causal relationship between the two. Unlikely, GDP and other macroeconomic variables have more significant impact on FDI.Further more, the paper examines the impact of environmental regulation and other factors on FDI from the perspective of investment in source countries, with direct investment in China ranked the top33country panel data, by dividing the source countries into two developed and developing countries, and establishing a multiple linear regression model. The study finds that environmental regulation in China, to some extent, has hindered the FDI from developing countries, but has little impact on FDI in developed countries. As most FDI is from developed countries, the impact of environmental regulation on FDI inflows is limited.On the basis of the above empirical findings, this paper, combined with China’s national conditions, makes appropriate policy recommendations on the formulation and implementation of investment policy and environmental regulation, in order to optimize the industrial structure, promote technological progress, and achieve sustainable economic development.