Foreign Direct Investment’s Impact on China’s Economic Growth, Technological Innovation and Pollution

In recent years, China has gradually become one of the countries with the largest levels of foreign direct investment (FDI). FDI has played a significant role in promoting Chinese economic development, and the FDI technology spillover effect is one of the core forces driving China towards reaching n...

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Main Authors: Shihong Zeng, Ya Zhou
Format: Article
Language:English
Published: MDPI AG 2021-03-01
Series:International Journal of Environmental Research and Public Health
Subjects:
FDI
Online Access:https://www.mdpi.com/1660-4601/18/6/2839
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spelling doaj-f4d68a047c064d77b55a7c603309fc4d2021-03-11T00:06:49ZengMDPI AGInternational Journal of Environmental Research and Public Health1661-78271660-46012021-03-01182839283910.3390/ijerph18062839Foreign Direct Investment’s Impact on China’s Economic Growth, Technological Innovation and PollutionShihong Zeng0Ya Zhou1Department of Applied Financial Economics, College of Economics & Management, Beijing University of Technology, Beijing 100124, ChinaDepartment of Applied Financial Economics, College of Economics & Management, Beijing University of Technology, Beijing 100124, ChinaIn recent years, China has gradually become one of the countries with the largest levels of foreign direct investment (FDI). FDI has played a significant role in promoting Chinese economic development, and the FDI technology spillover effect is one of the core forces driving China towards reaching new growth milestones. Therefore, due to the country’s interest in development, there is competition for FDI throughout China. However, the existing imperfect environmental protection system cannot prevent FDI from flowing into China’s highly polluting and resource-intensive industrial chain, possibly causing serious environmental problems. Therefore, the topic of properly introducing foreign capital to promote development and effectively end China’s current environmental pollution crisis has become a research focus. To explore FDI’s impact on China’s economic growth, technological innovation, and environmental pollution, we use Chinese provincial panel data for 2004–2016 to construct a dynamic panel simultaneous-equation model. Considering the interrelationships between the equations, we construct economic models of economic growth, technological innovation, and pollution emissions, and incorporate them into the same research system for generalized method of moments (GMM) estimation. Our results show that FDI has a significant and positive direct impact on China’s economic growth and technological innovation, and can furthermore have a significant pull effect on the domestic economy through the backward spillover channel. At the same time, FDI has a direct and significant impact on the increase in regional waste-water discharge, while exhibiting a pollution halo effect on the emission of sulfur dioxide (SO<sub>2</sub>) and chemical oxygen demand (COD) emissions directly. In addition, we observe “benign feedback mechanism” between technological innovation output and these three types of pollution, namely SO<sub>2</sub> emission, COD emissions, and ammonia and nitrogen discharge.https://www.mdpi.com/1660-4601/18/6/2839FDIeconomic growthinnovationpollutiondynamic panel simultaneous equation model
collection DOAJ
language English
format Article
sources DOAJ
author Shihong Zeng
Ya Zhou
spellingShingle Shihong Zeng
Ya Zhou
Foreign Direct Investment’s Impact on China’s Economic Growth, Technological Innovation and Pollution
International Journal of Environmental Research and Public Health
FDI
economic growth
innovation
pollution
dynamic panel simultaneous equation model
author_facet Shihong Zeng
Ya Zhou
author_sort Shihong Zeng
title Foreign Direct Investment’s Impact on China’s Economic Growth, Technological Innovation and Pollution
title_short Foreign Direct Investment’s Impact on China’s Economic Growth, Technological Innovation and Pollution
title_full Foreign Direct Investment’s Impact on China’s Economic Growth, Technological Innovation and Pollution
title_fullStr Foreign Direct Investment’s Impact on China’s Economic Growth, Technological Innovation and Pollution
title_full_unstemmed Foreign Direct Investment’s Impact on China’s Economic Growth, Technological Innovation and Pollution
title_sort foreign direct investment’s impact on china’s economic growth, technological innovation and pollution
publisher MDPI AG
series International Journal of Environmental Research and Public Health
issn 1661-7827
1660-4601
publishDate 2021-03-01
description In recent years, China has gradually become one of the countries with the largest levels of foreign direct investment (FDI). FDI has played a significant role in promoting Chinese economic development, and the FDI technology spillover effect is one of the core forces driving China towards reaching new growth milestones. Therefore, due to the country’s interest in development, there is competition for FDI throughout China. However, the existing imperfect environmental protection system cannot prevent FDI from flowing into China’s highly polluting and resource-intensive industrial chain, possibly causing serious environmental problems. Therefore, the topic of properly introducing foreign capital to promote development and effectively end China’s current environmental pollution crisis has become a research focus. To explore FDI’s impact on China’s economic growth, technological innovation, and environmental pollution, we use Chinese provincial panel data for 2004–2016 to construct a dynamic panel simultaneous-equation model. Considering the interrelationships between the equations, we construct economic models of economic growth, technological innovation, and pollution emissions, and incorporate them into the same research system for generalized method of moments (GMM) estimation. Our results show that FDI has a significant and positive direct impact on China’s economic growth and technological innovation, and can furthermore have a significant pull effect on the domestic economy through the backward spillover channel. At the same time, FDI has a direct and significant impact on the increase in regional waste-water discharge, while exhibiting a pollution halo effect on the emission of sulfur dioxide (SO<sub>2</sub>) and chemical oxygen demand (COD) emissions directly. In addition, we observe “benign feedback mechanism” between technological innovation output and these three types of pollution, namely SO<sub>2</sub> emission, COD emissions, and ammonia and nitrogen discharge.
topic FDI
economic growth
innovation
pollution
dynamic panel simultaneous equation model
url https://www.mdpi.com/1660-4601/18/6/2839
work_keys_str_mv AT shihongzeng foreigndirectinvestmentsimpactonchinaseconomicgrowthtechnologicalinnovationandpollution
AT yazhou foreigndirectinvestmentsimpactonchinaseconomicgrowthtechnologicalinnovationandpollution
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