Environmental impact of infrastructure-led Chinese outward FDI, tourism development and technology innovation: a regional country analysis

Abstract

Investment and construction of energy and transport-related infrastructure are closely linked to the achievement of sustainable development goals. China’s infrastructure-led foreign investment, technical integration, and tourism with Belt and Road Initiative (BRI) countries have maintained exponential growth. This growth certainly has an impact on economic development mode and environmental sustainability. Therefore, this study examines the impact of infrastructure-led Chinese outward foreign direct investment, tourism development, and technology innovation on carbon emissions across the selected BRI node countries and respective regions. This study employs cross-sectional autoregressive distributive lag model to deal with parameters and cross-sectional heterogeneity. The results exhibit that foreign direct investment and technology innovation reduces carbon emissions in the long run, while tourism development and its interaction with foreign direct investment led to higher emissions in the overall BRI sample. In contrast, the regional estimates show significant variations in the magnitude and direction of the relationship, where foreign direct investment produces an emissions-increasing effect in South Asian and MENA countries. Moreover, the results support the validity of the Environmental Kuznets Curve hypothesis in overall and regional samples. These results are also endorsed by common correlated effects means group estimator and imply relevant policies.

Keywords:

• infrastructure-led Chinese outward FDI
• technology innovation
• tourism development
• carbon emissions
• belt and road initiative

Disclosure statement

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

Supplemental data

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Notes

1 Table 1 exhibits that a major strand of literature uses total FDI flows as % of GDP by simultaneously testing the validity of EKC. Principally, the use of the FDI/GDP ratio is inappropriate in this scenario because CO₂ emissions are by definition positively associated to GDP, inferring that FDI-based environmental gains/loss could persuade a decline/incline in the FDI/GDP ratio, and thus, a downward/upward bias on our estimate of the effects of FDI on carbon emissions. Based on these arguments, we use log FDI stocks to produce unbiased estimates.

2 Currently, more than 130 organizations and countries have joined/signed the BRI (Shahriar, Kea, and Qian 2019). However, as per official Belt and Road Portal, there are 65 countries, where Chinese outward foreign direct investment is placed under the ambient of BRI. From those 65 countries, we have selected 54 countries based on availability of FDI data.