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The impact of foreign direct investment on carbon emissions in China: a provincial panel data analysis

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  • Xuchong YAN

    (Osaka City University, Japan)

Abstract

This paper analyzes China’s provincial data from 2004 to 2021 using a panel regression analysis model to examine the impact of foreign direct investment (FDI) growth on China’s carbon emissions. The empirical results show that: 1) FDI, GDP per capita, industrial structure, and fiscal investment significantly contribute to increased carbon emissions, while economic openness has a significant negative effect. 2) From the perspective of regional samples, FDI in the eastern and central regions positively influences carbon emissions, with GDP per capita having a positive effect on the eastern region and a negative one in the central and western regions. Industrial structure, fiscal investment, and population also significantly affect carbon emissions, highlighting regional economic and structural disparities. The analysis suggests that early environmental protection inadequacies and the influx of high-pollution, high-energy industries due to FDI contributed to rising emissions. Therefore, this study recommends enhancing FDI quality standards, limiting high-pollution industries, and promoting investment in green technologies to foster a low-carbon economy.

Suggested Citation

  • Xuchong YAN, 2025. "The impact of foreign direct investment on carbon emissions in China: a provincial panel data analysis," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania / Editura Economica, vol. 0(1(642), S), pages 85-102, Spring.
    • Handle: RePEc:agr:journl:v:xxxii:y:2025:i:1(642):p:85-102
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    References listed on IDEAS

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    1. Sung, Bongsuk & Song, Woo-Yong & Park, Sang-Do, 2018. "How foreign direct investment affects CO2 emission levels in the Chinese manufacturing industry: Evidence from panel data," Economic Systems, Elsevier, vol. 42(2), pages 320-331.
    2. Adeel-Farooq, Rana Muhammad & Riaz, Muhammad Faraz & Ali, Tariq, 2021. "Improving the environment begins at home: Revisiting the links between FDI and environment," Energy, Elsevier, vol. 215(PB).
    3. -, 2023. "Foreign Direct Investment in Latin America and the Caribbean 2023," La Inversión Extranjera Directa en América Latina y el Caribe, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL), number 48979 edited by Eclac, May.
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