Does FDI Increase Industrial Energy Consumption of China? Based on the Empirical Analysis of Chinese Provinces Industrial Panel Data

ABSTRACT

The article builds the simultaneous equations model of the total effect of FDI influencing China’s industrial energy consumption, Chinese provinces industrial panel data as the study sample, uses 2SLS and GMM methods to empirically estimate the equations model, and elastic analysis to calculate the magnitude and direction of the different effects at the path of FDI. The results show that the total effect of FDI influencing China’s industrial energy consumption is negative, the entry of foreign capital increases by 1%, the total effect is to make China’s industrial energy consumption increase by 0.19%, the negative FDI scale effect (0.15%) and FDI composition effect (0.21%) overwhelm the positive FDI technique effect (0.17%).

KEY WORDS:

• elasticity
• FDI
• influencing effects
• simultaneous equations

Funding

The research is supported by the Major Program of the National Social Science Foundation of China (Grant NO.12&ZD059); the National Natural Science Foundation of China (Grant No.71303176); the Humanities and Social Science Foundation of the Ministry of Education in China (Grant NO.13YJC790073).

Notes

^1. TC index is one of the commonly used indicators of international competitiveness analysis. The formula is: TC = (EX-IM)/(EX + IM), which IM, EX, respectively, refers to total imports and exports of goods. The TC index between −1 and 1 closer to 0 indicates competitiveness is closer to the average level; the index closer to −1 indicates the weaker competitiveness, only importing; the index closer to 1 indicates the greater competitiveness, only exporting.

^2. Of course, technical level of the foreign-funded enterprises may lower than domestic-funded, then it is likely to have a “negative” technology spillover.

^3. In this article, reducing the energy consumption represents the positive effect or active effect, increasing the energy consumption represents the negative effect or inactive effect.

^4. The 25 industrial sectors are: Electric steam hot water production and supply, electrical machinery and equipment manufacturing, electronic and communications equipment manufacturing, textiles, non-metallic mineral products, ferrous metal mining, ferrous metal smelting and rolling processing chemical fiber, chemical materials and chemical products manufacturing, transportation equipment manufacturing, fabricated metal products, coal mining and washing, general machinery manufacturing, oil and gas exploration oil processing and coking, food processing food, beverage, tobacco, paper and paper products pharmaceutical manufacturing, instrumentation cultural and office machinery manufacturing, non-ferrous metal smelting and rolling processing non-ferrous metal industry and special equipment manufacturing.

^5. As the “China statistical yearbook on science and technology” presents unclearly the data of the three technical variables, depending on the purpose and source of corporate expenditures, the sum of Intramural Expenditures on S&T Activities and expenditures on Technical Reform represents independent research, the sum of Expenditure for Acquisition of Foreign Technology and Expenditure for Assimilation of Technology represents foreign technology importing; Expenditure for Purchase of Domestic Technology refers to domestic technology purchase.

^6. Because after 2009, “China Statistical Yearbook on science and technology” no longer presents intramural Expenditures on S&T Activities of industrial enterprises above designated size and “foreign-funded” industrial enterprises, the sample of this article can only select between 1999 and 2008. Here, 30 provinces of China include Beijing, Tianjin, Hebei, Shanxi, Inner Mongolia, Liaoning, Heilongjiang, Shanghai, Fujian, Shandong, Henan, Hunan, Shaanxi, Gansu, Ningxia, Xinjiang, Jilin, Jiangsu, Zhejiang, Anhui, Jiangxi, Hubei, Guangdong, Guangxi, Hainan, Chongqing, Sichuan, Guizhou, Yunnan, and Qinghai.

^7. Meanwhile, estimating the results of the GMM method also passed the AR (2) and Sargan test, limited space, not reported in the table.

^8. The Government of China is committed to reducing the country’s carbon intensity by 40–45 percent between 2005 and 2020.

Additional information

Funding

The research is supported by the Major Program of the National Social Science Foundation of China (Grant NO.12&ZD059); the National Natural Science Foundation of China (Grant No.71303176); the Humanities and Social Science Foundation of the Ministry of Education in China (Grant NO.13YJC790073).