Environmental regulation, foreign direct investment and China’s economic development under the new normal: restrain or promote?

Long Chen, Nan Wang (), Qiyun Li and Wenjun Zhou
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Long Chen: Peking University
Nan Wang: Hebei GEO University
Qiyun Li: Jeonbuk National University
Wenjun Zhou: Hebei GEO University

Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, 2023, vol. 25, issue 5, No 15, 4195-4216

Abstract: Abstract Environmental resources play an extremely important role in economic development. In the context of China’s economic development entering a new normal, attaching importance to environmental protection and strengthening environmental regulations will have an important impact on the original foreign direct investment (FDI) and China’s economic development. Therefore, this paper combines the characteristics of the “new normal” of China’s economic development, takes 30 provinces in China from 2008 to 2017 as the research object, and uses the PVAR model and impulse response function to re-verify the interaction mechanism and path among environmental regulation, FDI and high-quality economic development. The study found that: (1) There is an obvious mutual promotion relationship between environmental regulations and the quality of China’s economic development and economic development environment. Strengthening environmental regulation is conducive to the realization of China’s economic "new normal" development goal. (2) Although the strengthening of environmental regulation will have a significant constraint effect on FDI and China’s economic growth rate, but the effect is relatively small. (3) FDI and economic growth rate variables are mutually motivated and promote each other, but both of them have a significant inhibitory effect on regional environmental regulation. In general, under the background of the “new normal” of China’s economic development, appropriately increasing the intensity of environmental regulation is not only conducive to environmental protection and promoting high-quality and sustainable economic development, but also can serve the purpose of guiding the structure of foreign investment and transforming the mode of economic growth.

Keywords: Environment; High-quality economic development; Foreign investment; PVAR model; China (search for similar items in EconPapers)
Date: 2023
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DOI: 10.1007/s10668-022-02239-0

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