Research On The Impact Of Air Pollution On China's FDI

Foreign Direct Investment,a vital source of capital and also one major way of international capital circulation,has boosted China's economic development substantially.In recent years,with its improving business and legislative environment,China deepens its openness policy,attracting an increasing amount of FDI and moving the sum from traditional industry to high-tech industry.As of 2017,25.8%of FDI went to manufacturing,while 72.7%of FDI went to the service industry.Although China has a promising FDI rate of return,there are some backdrops that can't be ignored but can block more FDI from crowding into China,one of which is environmental pollution.In the past several decades,there was a time when local government sacrificing environment for GDP growth.As a result,many pollution problems burst out after 2020,one of them that was most relevant to people's life was air pollution.One of the most heart-breaking case was the smog from 2013 to 2015.In December 2013,the serious smog in mid-and eastern part of China enveloped most provinces with PM2.5 over 500 for a long time.Will air pollution like this have an impact on FDI into China?From exploratory analysis of economic and environmental data available,this thesis has several findings:1.There is a huge gap across different provinces in terms of FDI,GDP per capita,and foreign trade volume.This imbalanced structure of China's economy does exist,but FDI in China has entered high-tech industry these years.2.Two clusters are identified.Cluster A:high FDI—high air pollution—high GDP per capita-great number of foreign enterprise—high foreign trade volume.Cluster B:high FDI—low air pollution—high GDP per capita—great number of foreign enterprise—high foreign trade volume.3.Geographic location and policies can have a huge impact on FDI.After putting all the relevant variables into a simple multi-variant regression and entity-fixed regression model,this thesis proves that H2 is more convincing.Holding all the other conditions,if air quality worsens by one unit in terms of AQI,FDI is likely to decrease by 0.004%.However,if there are policies in this province attracting more FDI,this decrease can be offset by 0.003%.