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

Xuchong Yan
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Xuchong Yan: Osaka City University, Japan

Theoretical and Applied Economics, 2025, vol. XXXII, issue 1(642), Spring, 85-102

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.

Keywords: foreign direct investment; carbon emissions; China; two-way fixed effects. (search for similar items in EconPapers)
Date: 2025
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