Foreign Direct Investment, Industrial Pollution And Environmental Regulation

Environmental Regulation, which is an effective method to deal with this relation, has been put more emphasis on and played an important role. This paper discusses about the relation between FDI, industrial pollution and environmental regulation of China. Firstly, this paper discusses the relation between FDI and industrial pollution theoretical and empirical. We declare that the international Shift of Pollution Intensive Industry (SPIIs) is caused by cost-profit disparity. Then the Pollution Haven Hypothesis(PHH) also prove the existence of ecology dumping from developed countries to developing countries. Then, we prove two propositions: (1)FDI and industrial pollution have tight relation in China; (2) FDI is one of the reasons of industrial pollution. Then, this paper proves theoretically and empirically that environmental regulation has negative influence on FDI inflow. Environmental regulation is not the main reason of FDI inflow, but such as economic development level, economic growth rate, human capital, labor cost and so on. The negative correction of environmental regulation and FDI has been concluded by the rising cost. Strict environmental regulation influence firm's product function by variable cost, fixed cost and enter barrier so then influence firm's investment choice. And the regression outcome of comprehensive model thinking of FDI, industrial pollution and environmental regulation shows that the strict environmental regulation can promote FDI inflowing into China, and industrial pollution is not the reason of FDI inflow. Further more, more FDI flowing into China, more environmental destroy.The study of environmental regulation is still developing, which dates from 1990s. The relevant literature and fruit are all achieved by the European and the US's scholars, so the study of environmental regulation in China is in starting period with rare literature. This paper aims to give an overview of this field.