Study On The Impact Of Environmental Regulation On The Location Choice Of Foreign Direct Investment

Since the reform and opening up in 1978,China's economy has experienced 30 years of rapid economic growth.During this period,the FDI inflow of China grew at an average rate of 14%.In 2014,China became the largest foreign capital inflow country in the world,surpassing the United States.The technological spillover,industrial upgrading and trade creation caused by FDI have become the important reasons for China's economy miracle.However,the inflow of FDI is also a?double-edged sword? for China,which brings a series of problems while promoting economic growth.Problems such as that the unbalanced regional distribution of FDI in China has further aggravated the imbalance of regional economic development,and that the entry of FDI has brought great impact and severe challenge to China's industry,especially to the traditional manufacturing and service industries,and so on.It is worth pointing out that a large number of FDI has also brought serious environmental problems,and caused great damage to China's environmental quality,making China's environmental problems become increasingly prominent.In the face of increasingly serious environmental problems,our government attaches great importance to the environmental protection and the sustainable long-term development.Especially in recent years,under the new normal economic situation of our country,the importance of sustainable development and the construction of ecological civilization have been given full attention.General Secretary Xi Jinping has repeatedly emphasized the importance of protecting the ecological environment in public places,such as“clear waters and mountains are as good as mountains of gold and silver??“protecting the ecological environment like protecting glasses,treating the ecological environment just like life”?“the ecological environment protection should be placed in a more prominent position?,and so on.At the same time,our government has been adapting to the international trend,gradually adopting strict new standards in environment policy,and striving to reduce environmental damage through administrative control.For example,the report of the Nineteenth National Congress of the Communist Party of China pays close attention to the key areas,key problems and weak links of environmental protection,and puts forward the key tasks and measures to strengthen the control of air,water and soil pollution,and implements the strictest ecological environment protection system.Under the trend of stricter environmental regulation policies,it is of great practical significance to evaluate the spatial distribution of FDI entering China from the perspective of environmental regulation,to coordinate environmental regulation policies and to introduce foreign investment policies so as to maintain a balance between attracting FDI and protecting environment.At the same time,the relationship between the policy of environmental regulation and FDI has long been the focus of academic research at home and abroad.However,the results of a large number of related studies are different.Specifically,whether environmental regulation will impede or promote the inflow of FDI,has not yet been reached a conclusion in academic circles.In fact,the interpretation and demonstration of this issue has great academic research value.In view of the above practical and theoretical reasons,based on the relevant theories and methods of international investment and environmental economics,this paper studies the location choice of FDI in China by methods of combining theory with practice and qualitative analysis with quantitative test.On the basis of discussing the mechanism of environmental regulation affecting FDI enterprises' investment decision-making,this paper uses the matching data of China's industrial enterprises from 2005 to 2013 and the list of enterprises under the state's key monitoring policies and the city panel data from 1995 to 2016,and then examines the impact of environmental regulation on location choice of FDI from the micro-level of cities and enterprises.This paper draws the following five main conclusions:(1)At the micro level,the impact of the rising level of environmental regulation on the investment decisions of FDI enterprises depends on the cost effect of environmental regulation and the compensation effect of innovation.At the macro level,the profitability of capital will promote the flow of capital between regions,thus environmental regulation will have an impact on the regional distribution of FDI.(2)The implementation of the national key monitoring enterprise policy has a negative impact on FDI of foreign-invested wastewater enterprises.The implementation of the national key monitoring enterprise policy has no impact on FDI of foreign-invested waste gas enterprises.(3)The implementation of the national key monitoring enterprise policy in the eastern and central regions has no impact on the FDI of foreign-invested wastewater enterprises located in these two regions,while the implementation of the national key monitoring enterprise policy in the western region will cause the level of FDI of foreign-invested wastewater enterprises in this region to rise.The implementation of the national key monitoring enterprise policy in three regions of China has no impact on the FDI of foreign-funded enterprises with waste gas located in these three regions.(4)Compared with the cities that have not been implemented the policy of two control zones,the cities that have been implemented have lower actual foreign capital utilization.(5)The FDI effect of environmental regulation policy of two control zones is different for cities in different regions.For cities in eastern and central regions,the policy will restrain FDI inflow,while the policy in cities in western regions will no effect on FDI inflow.According to the above conclusions and related issues,this paper puts forward the following policy recommendations.In terms of environmental regulation,we can guide local government to correctly understand the impact of environmental regulation on FDI,to promote the diversification of the application of environmental regulation tools,to implement different environmental regulation policies in different region and optimize the regional structure of foreign investment.In terms of improving the investment environment and introducing foreign capital,we should first continue to create a more attractive investment environment.Secondly,we should adhere to scientific selection,high-standard construction,increase our efforts to attract high-quality foreign investment projects in line with the reality of regional industrial development and the long-term development goal of local economy.Finally,we should speed up the introduction of new ones.Foreign investment law,and constantly improve the central and local foreign investment complaints processing mechanism.