A Study On The Threshold Effect Of China's Environmental Regulation On IFDI

With the continuous deepening of reform and opening up,the scale of China's attraction of foreign direct investment'(FDI)continues to rise.However,with the promotion of rapid economic growth by foreign direct investment,the issue of environmental pollution is also becoming more and more serious.There are mainly two different hypotheses about the impact of environmental regulation on IFDI,the“Pollution Haven Hypothesis" and the“Porter Hypothesis".The reason for this controversy is probably due to the fact that traditional research mostly examines the linear impact of environmental regulation on IFDI under the assumption of regional or industrial homogeneity.However,different regions of China have huge differences in economic scale,industrial structure and pollution discharge,etc.And the production scale,technology level and so on in different industries are also significantly different.Therefore,IFDI's response to environmental policies should be different in different regions and industries.Even if in the same region and industry,the relationship of environmental regulation and IFDI is not a simple linear.Therefore,this paper selects the panel data of 30 provinces and 35 industrial sectors in China from 2004 to 2015 and makes use of the threshold panel regression model to study the threshold effect of environmental regulation on IFDI from the inter-provincial and industrial levels respectively.The main conclusions are as follows:(1)There is spatial heterogeneity in the impact of environmental regulation on IFDI.The overall national sample shows that the impact of environmental regulation on IFDI is a U-shaped curve.In the eastern and central regions,there is a single threshold effect of environmental regulation on IFDI and there is a U-shaped curve between environmental regulation and IFDI.However,the threshold value in the eastern region is higher than the central region;environmental regulation in the western region has no threshold effect on IFDI.Combined with the fixed-effect test,it is found that the economic growth in the central and western regions is still the primary task and the environmental regulation is not yet a major factor affecting the inflow of IFDI.(2)There is industry heterogeneity in the impact of environmental regulation on IFDI.In the whole industrial sector,the impact of environmental regulation on IFDI has a double threshold effect.When the environmental regulation is lower than the threshold value of 346.99,it will impede the inflow of IFDI.When the environmental regulation is higher than 346.99 and lower than 514,09,the increasing of environmental regulation will promote the inflow of IFDI.However,the intensity of environmental regulation is not the higher the better,when crossing the second threshold value of 514.09,excessive regulation cost will make multinational companies lose investment motivation,and the impact on IFDI will shift from positive promotion to negative inhibition.Industry sector sample estimates show that industry heterogeneity makes a significant difference in the threshold effect of environmental regulation on IFDI in both pollution-intensive and cleaner production sectors.The impact of environmental regulation on IFDI in the industries with pollution-intensive is U-shaped,and the environmental regulation of cleaner-production industries has an inverted U-shaped impact on IFDI.