Does FDI Worsen Smog Pollution In China?

Forty years since the implementation of the Reform and Opening-up policy,China has made significant progress in introducing Foreign Direct Investment(FDI).In 2014,China became the largest FDI recipient country.In 2018,the amount of China’s FDI actually used was up to US$135 billion.With the introduction of large sums of FDI,China has not only alleviated the financial shortage during its rapid economic development,but has also promoted local technological innovation,which is considered to be the cornerstone of China’s economic growth.At the current stage where the investment scale is constantly expanding,there are more aspects to be considered in FDI research.Among all aspects,the environmental effects brought by the expansion of investment scale have received more and more attention,especially the frequent occurrence of smog pollution in recent years.According to the global urban pollution database released by the World Health Organization(WHO)in 2016,thirty cities in China were among the top 100 cities in the world with the highest concentration of smog(PM2.5).In the "Global Burden of Disease Assessment" project published by the WHO,it was estimated that in 2010,outdoor particulate matter pollution(mainly PM2.5)in China caused 1.2 million premature deaths.Opinions are polarized in the current research on the relationship between FDI and traditional environmental pollution.One is the deteriorating theory,which is mainly based on the "Pollution Refuge" hypothesis;the other is the beneficial theory,which is mainly based on the "Pollution Haven" hypothesis.In the face of increasing environmental pollution,what kind of impact does China’s FDI have on smog pollution?This is the most crucial issue to be studied in this paper.The research theme of this paper is mainly based on the threshold effect of FDI and smog in China from the perspective of environmental regulation.First of all,by studying and summarizing related research literature both at home and abroad,this paper qualitatively analyzes both the impact of FDI on smog pollution from a theoretical perspective and the distributive characteristics of China’s FDI and smog pollution based on time trends and industrial structure areas.In addition,this paper reviews the theoretical mechanism of FDI on smog pollution,based on which this thesis,by constructing a fixed effect and threshold model of FDI on smog pollution,also conducts an empirical investigation of FDI and smog pollution under the influence of environmental regulations from a full-sampled and regional perspective.As for data selection,this paper uses the data provided by Columbia University’s EOSDIS database.The data are collected by Columbia University’s Center for Social Economic Data and Application based on the annual mean value of PM2.5 concentration around the world through the global satellite monitoring system.The specific contents of this paper are as follows:The first part mainly introduces the research background and significance of FDI and smog pollution,context and framework,innovative points and deficiencies of this paper.The second part mainly sorts out relevant theoretical research on the relationship between FDI and the host country’s environmental pollution.This part examines non-atmospheric pollutants and conventional air pollutants mainly based on the research object field.Moreover,it gives a literature review about the impact of FDI on smog pollution.This part has revealed that the final research results of scholars are significantly different because of different research methods.Besides,it has also found that the current domestic research on FDI and smog pollution mainly uses data from the provincial level while there are relatively fewer studies conducted from the urban micro-level.The third part gives an analysis of the characteristics of FDI and smog pollution in China under the influence of environmental regulations.This paper analyzes the characteristics from two dimensions:time trend distribution and regional manufacturing distribution,explicating in detail about the characteristics and connections of FDI and smog in these two aspects as the intensity of environmental regulation changes.The fourth part explains the theoretical mechanism.Based on the review of existing research results in the field of FDI and smog pollution from the perspective of environmental regulation,this part proposes the theoretical basis and mechanism of FDI on smog pollution respectively.The mechanism of FDI on smog pollution is enacted through three channels of influence,namely energy structure,industrial structure and technological innovation.FDI has different effects on smog pollution when environmental regulations are at different levels.The fifth part is an empirical test of the relationship between FDI and smog pollution with an introduction of the model and variable settings and data sources of this paper.Based on the relevant data of 260 prefecture-level cities in China from 2003 to 2016,this thesis analyzes the overall fixed effects to examine the relationship between FDI and smog.It also constructs a threshold model by taking the factors of environmental regulation into consideration,thereby conducting empirical tests on the threshold effects of FDI and smog pollution in China at the national and sub-regional levels,and makes a realistic interpretation of the regression results.The sixth part is the final part which includes the conclusions and suggestions of this paper.This chapter summarizes the research conclusions in the whole paper and makes some substantive suggestions about using FDI to improve smog pollution in China.The research result of the paper mainly includes four parts:(1)FDI has a significant accelerating effect on smog pollution,and there is a "pollution paradise" effect.(2)The impact of FDI on smog has an environmental regulation threshold effect,and the environmental regulation threshold has a single threshold effect.(3)According to different regions,FDI has the dual effects of "pollution paradise" and "pollution aura".FDI has a significant negative impact on the smog pollution in the eastern and central regions,while the western region has a certain improvement due to its vast geographical space and ecological environment self-purification ability.(4)The proportion of regional manufacturing FDI in FDI has different relevance to regional smog pollution according to different groups of environmental regulation intensity.Compared with previous research,this paper mainly innovates in three aspects:research objects,data selection and research methods.Firstly,this paper uses satellite data to comprehensively measure the PM2.5 concentration of air pollution degree to represent smog index,so as to solve the problem that the index is not available in China’s official statistics before 2013.At the same time,the data of this paper is updated to the latest statistics to avoid the lag of time in samples.Secondly,as the existing research literature tends to conduct macro-level analysis at the provincial level,this paper uses sample data from 260 prefecture-level cities in China from 2003 to 2016 to make up for the lack of micro-level research.Last but not the least,this paper builds a framework of threshold effects of FDI on smog pollution based on the intensity of environmental regulations,analyzes the possible non-linear characteristics between FDI and smog,enriches and deepens the understanding of smog pollution to provide a new perspective on smog pollution research.