The Effects Of Official Environmental Regulation In China On Foreign Direct Investment

Since 1979,FDI has become very important for China's economic growth.The World Investment Report shows that in 2014,global FDI was 1.3 trillion US dollars,while China contributing to over 10% of all.Since then,China has become the world's largest FDI inflow country for the first time.However,with the development of FDI,environmental destructions are more and more sever.In the meetings held in 2016,the environmental problems remained the focus.Chairman made reports on environmental protection.The most noticeable thing in the report was that “China will soon introduce environmental taxes”.This shows that China intends to set more strict environmental regulations.Such official environmental regulations will inevitably affect the inflow of FDI dramatically.This article intends to explore the impact of official environmental regulation of China on FDI in pollution-intensive industries to explore whether the “pollution heaven effect” exists in China.In the research on the impact of environmental regulation on FDI,scholars have come to different conclusions through research and analysis.However,there are very few relevant studies on China at the current stage,and little paper starts from the industry level.Based on foreign direct investment and environmental economics theory,this article uses literature analysis,mechanism analysis,and empirical analysis to study the impact of different types of official environmental regulations on FDI in pollution-intensive industries in China,and the industry heterogeneity from the perspective of monopoly level and technology intensity.This article selects panel data of 28 pollution-intensive industries from year 2006 to 2015 to conduct empirical tests,and combines China's current situation to choose the other factors that affect FDI to profoundly explore the effect of official environmental regulation to FDI in China.Finally,it is concluded that there is a negative correlation between official environmental regulation and FDI inflow changes in China,and the “pollution heaven” effect is prominent in pollution-intensive industries,but monopolistic and technology-intensive industries are less sensitive to environmental regulation.The conclusions of this paper can theoretically enrich the research on China's environmental regulation on the impact of FDI in pollution-intensive industries.Finally,based on the empirical results,this article proposes to implement environmental regulation policies at various levels,especially market-incentive environmental regulation.For pollution-intensive industries,it is necessary to introduce FDI of monopolistic and technology-intensive industries,which does not endanger national key industries.Chinese government could expand market size and improve the quality of the workforce to attract FDI of high quality.