Empirical Study On Impact Of Fdi On Energy Intensity In China

Since the reform and opening up, China’s economy has made remarkable achievements. China has become one of the countries which have the fastest economic growth rate. During the past30years, China’s GDP has risen from3645billion Yuan in1978to300670billion Yuan in2008. The world rankings have risen from the10th in1978to the third in2008, only behind America and Japan. Economic share has risen from1.8%in1978to7.3%in2008. However, with the rapid economic development, our energy consumption is growing. The energy problem, especially how to reduce energy intensity, has become the critical factor which influences China’s sustainable development.Many factors jointly influence China’s energy intensity, such as energy price, the adjustment of industrial structure, technological progress, energy structure and so on. Among the factors, the impact of FDI and international trade on energy intensity has caused wide attention in academic circles. Based on the review of related literatures, this paper systematically test the logic relationship between FDI and energy intensity, analyze the difference of the relationships between different areas and energy intensity and make further analysis on how FDI influences energy intensity. Using panel data of30provinces from1995to2008, this paper adopts panel unit root test, panel co-integration, panel causality test and panel fixed effects model to analyze the relationships between different areas and energy intensity. Against the background of growing FDI, this study has important practical significance on how to guide the rational use of FDI and how to use FDI to build a resource-conserved society.Firstly, this paper analyzes the current situation of FDI and energy intensity. The results show that:Since1985, our country’s FDI is growing, but different industries and areas have different FDI using scale. Since the opening, our country’s energy intensity continuously decline, but it is still in high level position compared to developed countries. And different industries and areas have different energy intensity. Secondly, based on the FDI scale effect, structure and technological effects, this paper uses panel unit root test, panel co-integration and panel causality test to analyze the relationship between FDI of30provinces and energy intensity from1995to2008. Then this paper uses fixed effects model to analyze the relationship between FDI of the whole country, eastern area, middle area, western area and their energy intensity. The result shows that:No matter from the national level or eastern, middle and western level, both FDI and energy intensity is first order integrated variables. They have long-term stable co-integration relationship. And FDI is the long-term Granger causality of energy intensity. From the national level, the regression result shows that the hypothesis "FDI reduces energy intensity" is right, and the scale effects, structure effects and technological effects are all important factors which influence the national energy intensity. From the area level, the hypothesis "FDI reduces energy intensity" is right in eastern and middle area, but not right in western area. And the FDI effect is larger in middle area than in eastern area. The scale effects, structure effects and technological effects all influence the energy intensity of eastern, middle and western area. But because of the different economic development level and economic structure, the influence level is different.According to the findings of this research, this paper proposed adjustment and optimization of foreign direct investment, improving the introduction of foreign direct investment policy and the implementation of differentiated strategies to attract foreign investment to reduce energy intensity.