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How Improving the Quality of Foreign Direct Investment Can Promote Sustainable Development: Evidence from China

Author

Listed:
  • Lei Fu

    (School of Economics and Finance, Hohai University, Nanjing 211100, China)

  • Weiyi Liang

    (School of Economics and Finance, Hohai University, Nanjing 211100, China)

Abstract

Sustainable development is an inevitable derivative outcome of the advancement of social productive forces and the innovation of science and technology. In the current era, a multitude of global issues are intertwined. Sustainable development provides ideas and approaches of crucial value for resolving these difficult situations. This study constructs a micro-level indicator system to assess the quality of foreign direct investment and measures the quality of FDI in China from 2011 to 2022. Using the two-way fixed effects panel model, this study empirically tests the impact of FDI quality on China’s sustainable development and deeply examines the industry heterogeneity. The findings reveal that (1) micro-level FDI quality indicators avoid aggregation bias and lagged responses inherent in macro-level analyses, enabling precise and timely detection of foreign firms’ reactions to macroeconomic shifts. (2) Enhancing FDI quality exerts a positive and significant effect on China’s sustainable development, with notable variations across industries. (3) Further analysis shows that, first, in eastern coastal provinces, well-functioning market mechanisms amplify the positive externalities of high-quality FDI on resource allocation. Second, the moderating role of intellectual property protection in FDI’s human capital effects exhibits significant heterogeneity across industries.

Suggested Citation

  • Lei Fu & Weiyi Liang, 2025. "How Improving the Quality of Foreign Direct Investment Can Promote Sustainable Development: Evidence from China," Sustainability, MDPI, vol. 17(9), pages 1-29, April.
    • Handle: RePEc:gam:jsusta:v:17:y:2025:i:9:p:3824-:d:1641084
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