Does environmental regulation affect inward foreign direct investment? Evidence from China

ABSTRACT

Due to the combined pressures of reducing carbon emissions and enhancing high-quality international trade, the influence of environmental regulations on foreign direct investment has to be assessed. This study focused on China’s low-carbon cities development and analysed city-level panel data from 2003 to 2019 using a multi-period difference-in-differences approach to investigate its impact on foreign direct investment. The findings suggest that the implementation of the low-carbon cities policy resulted in both a reduction in the number of foreign-invested enterprises and a less effective utilization of foreign direct investment. Furthermore, western China was more profoundly affected. Finally, some valuable recommendations are presented.

KEYWORDS:

• Environmental regulation
• FDI
• LCC
• innovation

JEL CLASSIFICATION:

• Q56
• F23
• Q58

Disclosure statement

No potential conflict of interest was reported by the author(s).