IDEAS home Printed from https://ideas.repec.org/a/gam/jijerp/v20y2023i5p4320-d1083457.html
   My bibliography  Save this article

Impact of Two-Way FDI on China’s Environmental Quality: The Perspective of Environmentally Cleaner Production and End Treatment

Author

Listed:
  • Zhenya Zhang

    (School of Economics and Finance, Xi’an Jiaotong University, Xi’an 710064, China)

  • Wanping Yang

    (School of Economics and Finance, Xi’an Jiaotong University, Xi’an 710064, China)

  • Dong Li

    (School of Economics and Finance, Xi’an Jiaotong University, Xi’an 710064, China)

  • Yajuan Wang

    (School of Management, Fudan University, Shanghai 200433, China)

Abstract

While the rapid development of two-way foreign direct investment (FDI) has boosted China’s economic growth, its impact on environmental quality is uncertain. Based on provincial panel data from China covering the period from 2002 to 2020, this paper proposes an environmental quality assessment index system for China from two aspects: environmentally cleaner production and environmental end treatment. The comprehensive environmental quality index (EQI), environmentally cleaner production index (EPI), and environmental end treatment index (ETI) were all measured, with the geographic information system tool and Dagum Gini coefficient used to analyse the indicators’ differences using a system-generalised method-of-moments (SYS-GMM) estimation to study the impact of two-way FDI on environmental quality in various regions across China. The results demonstrate that during the sample period, inward FDI positively impacted environmental quality and cleaner production but had a negative impact on environmental end treatment. Outward FDI significantly promoted EQI, EPI, and ETI, and the interaction between inward FDI and outward FDI positively impacted environmental quality and environmentally cleaner production, while it negatively impacted environmental end treatment. This indicates that under two-way FDI, China’s relationship with environmental quality has gradually evolved from ‘pollution first and then treatment’ to ‘green development of cleaner production’.

Suggested Citation

  • Zhenya Zhang & Wanping Yang & Dong Li & Yajuan Wang, 2023. "Impact of Two-Way FDI on China’s Environmental Quality: The Perspective of Environmentally Cleaner Production and End Treatment," IJERPH, MDPI, vol. 20(5), pages 1-31, February.
    • Handle: RePEc:gam:jijerp:v:20:y:2023:i:5:p:4320-:d:1083457
    as

    Download full text from publisher

    File URL: https://www.mdpi.com/1660-4601/20/5/4320/pdf
    Download Restriction: no
    File URL: https://www.mdpi.com/1660-4601/20/5/4320/
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Zihanxin Li & Nuoyan Li & Huwei Wen, 2021. "Digital Economy and Environmental Quality: Evidence from 217 Cities in China," Sustainability, MDPI, vol. 13(14), pages 1-20, July.
    2. Xiaoling Yuan & Caijuan Li & Kai Zhao & Xiaoyu Xu, 2021. "The Changing Patterns of Consumers’ Behavior in China: A Comparison during and after the COVID-19 Pandemic," IJERPH, MDPI, vol. 18(5), pages 1-21, March.
    3. List, John A. & Co, Catherine Y., 2000. "The Effects of Environmental Regulations on Foreign Direct Investment," Journal of Environmental Economics and Management, Elsevier, vol. 40(1), pages 1-20, July.
    4. Deyun Xiao & Luyao Gao & Lijia Xu & Zongjun Wang & Wu Wei, 2023. "Revisiting the Green Growth Effect of Foreign Direct Investment from the Perspective of Environmental Regulation: Evidence from China," IJERPH, MDPI, vol. 20(3), pages 1-20, February.
    5. Zhang, Chuanguo & Zhou, Xiangxue, 2016. "Does foreign direct investment lead to lower CO2 emissions? Evidence from a regional analysis in China," Renewable and Sustainable Energy Reviews, Elsevier, vol. 58(C), pages 943-951.
    6. Wen, Huwei & Lee, Chien-Chiang & Zhou, Fengxiu, 2021. "Green credit policy, credit allocation efficiency and upgrade of energy-intensive enterprises," Energy Economics, Elsevier, vol. 94(C).
    7. Yuan, Huaxi & Feng, Yidai & Lee, Chien-Chiang & Cen, Yan, 2020. "How does manufacturing agglomeration affect green economic efficiency?," Energy Economics, Elsevier, vol. 92(C).
    8. Ahmad Zomorrodi & Xiaoyan Zhou, 2017. "Impact of FDI on Environmental Quality of China," International Journal of Business, Economics and Management, Conscientia Beam, vol. 4(1), pages 1-15.
    9. Benarroch, Michael & Thille, Henry, 2001. "Transboundary pollution and the gains from trade," Journal of International Economics, Elsevier, vol. 55(1), pages 139-159, October.
    10. Dagum, Camilo, 1997. "A New Approach to the Decomposition of the Gini Income Inequality Ratio," Empirical Economics, Springer, vol. 22(4), pages 515-531.
    11. Ahmad Zomorrodi & Xiaoyan Zhou, 2017. "Impact of FDI on Environmental Quality of China," International Journal of Business, Economics and Management, Conscientia Beam, vol. 4(1), pages 1-15.
    12. Zhijun Feng & Bo Zeng & Qian Ming, 2018. "Environmental Regulation, Two-Way Foreign Direct Investment, and Green Innovation Efficiency in China’s Manufacturing Industry," IJERPH, MDPI, vol. 15(10), pages 1-22, October.
    13. Li, Linjie & Liu, Xiaming & Yuan, Dong & Yu, Miaojie, 2017. "Does outward FDI generate higher productivity for emerging economy MNEs? – Micro-level evidence from Chinese manufacturing firms," International Business Review, Elsevier, vol. 26(5), pages 839-854.
    14. Decai Tang & Zhangming Shan & Junxia He & Ziqian Zhao, 2022. "How Do Environmental Regulations and Outward Foreign Direct Investment Impact the Green Total Factor Productivity in China? A Mediating Effect Test Based on Provincial Panel Data," IJERPH, MDPI, vol. 19(23), pages 1-32, November.
    15. Duan, Hongbo & Yuan, Deyu & Cai, Zongwu & Wang, Shouyang, 2022. "Valuing the impact of climate change on China’s economic growth," Economic Analysis and Policy, Elsevier, vol. 74(C), pages 155-174.
    16. Fu, Xiaolan & Hou, Jun & Liu, Xiaohui, 2018. "Unpacking the Relationship between Outward Direct Investment and Innovation Performance: Evidence from Chinese firms," World Development, Elsevier, vol. 102(C), pages 111-123.
    17. Bingyu Zhao & Wanping Yang & Jun Wen & Wei Zhang, 2022. "The Financial Market in China under the COVID-19," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 58(13), pages 3726-3738, October.
    18. Letchumanan, Raman & Kodama, Fumio, 2000. "Reconciling the conflict between the 'pollution-haven' hypothesis and an emerging trajectory of international technology transfer," Research Policy, Elsevier, vol. 29(1), pages 59-79, January.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Fozia Latif Gill & K Kuperan Viswanathan & Mohd Zaini Abdul Karim, 2018. "The Critical Review of the Pollution Haven Hypothesis (PHH)," International Journal of Energy Economics and Policy, Econjournals, vol. 8(1), pages 167-174.
    2. Tao Ding & Yadong Ning & Yan Zhang, 2017. "The Contribution of China’s Outward Foreign Direct Investment (OFDI) to the Reduction of Global CO 2 Emissions," Sustainability, MDPI, vol. 9(5), pages 1-15, May.
    3. Marques, António Cardoso & Caetano, Rafaela Vital, 2022. "Do greater amounts of FDI cause higher pollution levels? Evidence from OECD countries," Journal of Policy Modeling, Elsevier, vol. 44(1), pages 147-162.
    4. Lingzhang Kong & Jinye Li, 2022. "Digital Economy Development and Green Economic Efficiency: Evidence from Province-Level Empirical Data in China," Sustainability, MDPI, vol. 15(1), pages 1-26, December.
    5. Yao Zhao & Xuena Kong & Mahmood Ahmad & Zahoor Ahmed, 2023. "Digital Economy, Industrial Structure, and Environmental Quality: Assessing the Roles of Educational Investment, Green Innovation, and Economic Globalization," Sustainability, MDPI, vol. 15(3), pages 1-24, January.
    6. Wang, Quan-Jing & Wang, Hai-Jie & Chang, Chun-Ping, 2022. "Environmental performance, green finance and green innovation: What's the long-run relationships among variables?," Energy Economics, Elsevier, vol. 110(C).
    7. Ekundayo P. Mesagan & Wakeel A. Isola & Kazeem B. Ajide, 2019. "The capital investment channel of environmental improvement: evidence from BRICS," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 21(4), pages 1561-1582, August.
    8. Zeng, Dao-Zhi & Zhao, Laixun, 2009. "Pollution havens and industrial agglomeration," Journal of Environmental Economics and Management, Elsevier, vol. 58(2), pages 141-153, September.
    9. Chien‐Chiang Lee & Ying Yuan & Huwei Wen, 2022. "Can digital economy alleviate CO2 emissions in the transport sector? Evidence from provincial panel data in China," Natural Resources Forum, Blackwell Publishing, vol. 46(3), pages 289-310, August.
    10. Ilker Akar, 2019. "The Pollution Haven Hypothesis and Foreign Trade - A Survey on the Relation with Environment," Economics Literature, WERI-World Economic Research Institute, vol. 1(1), pages 37-50, June.
    11. Colin Kirkpatrick & Kenichi Shimamoto, 2008. "The effect of environmental regulation on the locational choice of Japanese foreign direct investment," Applied Economics, Taylor & Francis Journals, vol. 40(11), pages 1399-1409.
    12. Ahmed Nahar Al-Hussaini, 2019. "The Role of Financial Management in Testing Environmental Kuznets Curve in Kuwait: Evidence from ARDL Bound Testing Approach," International Journal of Energy Economics and Policy, Econjournals, vol. 9(3), pages 353-359.
    13. Zhao, Jinjing & Pan, Jie & Xie, Xiangwei & Su, Miao, 2024. "Green outward foreign direct investment and host country environmental effects: The home country's carbon emission reduction system is crucial," Energy, Elsevier, vol. 290(C).
    14. Wen Jun & Muhammad Zakaria & Syed Jawad Hussain Shahzad & Hamid Mahmood, 2018. "Effect of FDI on Pollution in China: New Insights Based on Wavelet Approach," Sustainability, MDPI, vol. 10(11), pages 1-20, October.
    15. Lv, Chengchao & Bian, Baocheng & Lee, Chien-Chiang & He, Zhiwen, 2021. "Regional gap and the trend of green finance development in China," Energy Economics, Elsevier, vol. 102(C).
    16. Zhou, Hao & Zheng, Mingbo, 2024. "Foreign direct investment and green innovation in China: An examination of quantile regression," Innovation and Green Development, Elsevier, vol. 3(3).
    17. Chen, Yi & Long, Xingle & Salman, Muhammad, 2021. "Did the 2014 Nanjing Youth Olympic Games enhance environmental efficiency? New evidence from a quasi-natural experiment," Energy Policy, Elsevier, vol. 159(C).
    18. Shi, Xing & Zeng, Yujie & Wu, Yanrui & Wang, Shuai, 2023. "Outward foreign direct investment and green innovation in Chinese multinational companies," International Business Review, Elsevier, vol. 32(5).
    19. He, Jie, 2006. "Pollution haven hypothesis and environmental impacts of foreign direct investment: The case of industrial emission of sulfur dioxide (SO2) in Chinese provinces," Ecological Economics, Elsevier, vol. 60(1), pages 228-245, November.
    20. Andriansyah Andriansyah & Taufiqurokhman Taufiqurokhman & Ismail Suardi Wekke, 2019. "Impact of Environmental Policy Factors on Tourism Industry: A Study from Indonesia Over Last Three Decades," International Journal of Energy Economics and Policy, Econjournals, vol. 9(3), pages 360-365.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:gam:jijerp:v:20:y:2023:i:5:p:4320-:d:1083457. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: MDPI Indexing Manager (email available below). General contact details of provider: https://www.mdpi.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.