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Can outward foreign direct investment improve China’s green economic efficiency?

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Abstract

Under the constraints of energy and environment, improving green economic efficiency (GEE) has become the key path to promote the sustainable economic development. Among the driving factors of GEE, the role of outward foreign direct investment (OFDI) is worth exploring. In this paper, we adopt the inter-provincial panel data of China from 2011 to 2019 and System Generalized Method of Moments (SYS-GMM) to explore the influence of OFDI on GEE. We find that OFDI significantly improves China’s GEE, and reverse technology spillover through direct investment in developed countries is an important way for OFDI to promote GEE. Regional heterogeneity test shows that OFDI significantly promotes GEE in eastern China; however, the promotion effect is not significant in midwestern China. Besides, the promoting effect of OFDI on GEE has been further improved after 2016. We further adopt panel threshold model and find that when the financial development (FD) and human capital (HUM) exceeds 2.0954 and 0.0290, respectively, the promoting effects of OFDI on GEE are greatly enhanced. We suppose that the above conclusions can provide guidance for policymakers to optimize OFDI and improve GEE.

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Data availability

The data that support the findings of this study are available from the corresponding author upon reasonable request.

Abbreviations

GEE:

Green economic efficiency

TFEE:

Total factor energy efficiency

GTFEE:

Green total factor energy efficiency

OFDI:

Outward foreign direct investment

FD:

Financial development

HUM:

Human capital

FDI:

Foreign direct investment

ES:

Energy structure

SOE:

State-owned enterprises

POPDEN:

Population density

ER:

Environmental regulation

OFDI-Spillover:

Reverse technology spillovers of OFDI

SYS-GMM:

System Generalized Method of Moments

IV:

Instrumental variable

2SLS:

Two-stage least square

MNEs:

Multinational enterprises

BRI:

Belt and Road Initiative

RCEP:

Regional Comprehensive Economic Partnership

SBCOFDI:

Statistical Bulletin of China’s Outward Foreign Direct Investment

CSY:

China Statistical Yearbook

CESY:

China Energy Statistical Yearbook

CSYE:

China Statistical Yearbook on Environment

SYCIFA:

Statistical Yearbook of the Chinese Investment in Fixed Assets

SYCIF:

Statistical Yearbook of the Chinese Investment Field

SYEP:

Statistical Yearbooks of each province

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Funding

This work was supported by the National Social Science Foundation of China (18ZDA040 and 20BJL038).

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  1. Chong Wang & Lei Wang

    Present address: Economics and Management School, Wuhan University, 299 Bayi Road, Wuhan, 430072, China

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    1. Chong Wang
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    2. Lei Wang
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    Contributions

    Chong Wang: organizing data, methodology, software, writing the original draft.

    Lei Wang: conceptualization, supervision.

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    Correspondence to Chong Wang.

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    Highlights

    • Improving green economic efficiency is the key to promoting sustainable economic growth in China.

    • Outward foreign direct investment is an important driving force for improving China’s green economic efficiency.

    • Reverse technology spillovers from direct investment in developed countries significantly promote green economic efficiency.

    • The promoting effect of outward foreign direct investment on green economic efficiency has significant regional heterogeneity.

    • There are threshold effects of financial development and human capital in the influence of outward foreign direct investment on green economic efficiency.

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    Wang, C., Wang, L. Can outward foreign direct investment improve China’s green economic efficiency?. Environ Sci Pollut Res 30, 37295–37309 (2023). https://doi.org/10.1007/s11356-022-24823-7

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