The Relationship Between Foreign Investment And Policy Of Environmental Regulation

It is believed that relatively lenient environmental standards give developing countries a comparative advantage in pollution-intensive goods. Thus, freer trade will harm their environment. The logic seems plausible since it costs money to conform with more stringent environmental requirements in developed countries and profit-maximizing firms would want to relocate their production activities. But the problem is that the empirical studies now show little evidence to support the "pollution haven" hypothesis. The first possibility is that the "pollution haven" hypothesis is after all just a popular myth that does not hold in reality. An alternative view is that the "pollution haven" hypothesis is valid but the empirical researchers have not tried hard enough to uncover this "dirty secret".This paper makes an effort in two different ways to enhance our ability to detect the possible "dirty secret" that multinational firms flock to our country with weak environmental protection .We find weak support for the "pollution haven" hypothesis. In particular, the most evidence comes from in some highly pollution-intensive industries. However, the support for the pollution haven hypothesis is not robust to our checks. The main motive of FDI come to china is not to transform the pollution, they are attracted by the factors such as the scale of market, the speed of the economic growth, the combined effect, etc. Therefore, if there are some transfers of pollution-intensive industries from developed countries to China, the actual transfer would be marginal pollution-intensive industries in the standardization phase or pollution-intensive products.