Functional Upgrading of Value Chains and the Carbon Emissions Reduction Embodied in China’s Exports: From the Perspective of the Improvement in the FDI Quality

Chen Fuzhong, Luo Ke and Kangyin Dong ()
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Chen Fuzhong: School of International Economics and Trade, University of International Business and Economics Beijing China
Luo Ke: School of International Economics and Trade, University of International Business and Economics Beijing China

China Finance and Economic Review, 2024, vol. 13, issue 4, 106-128

Abstract: Improving the quality of foreign investment to help functional upgrading of the value chain is an important starting point for China’s manufacturing industry to achieve low-carbon and high-quality development. Based on the data of the functional activities of each manufacturing greenfield investment project in China from 2003 to 2018, this paper constructs specialization index of the upstream and downstream functional division of labor of value chains, and theoretically explains and empirically tests the impact and mechanism of the functional upgrading of the value chain driven by the improvement of foreign investment quality on the embodied emissions in China’s export trade. The results show that the functional upgrading of the value chain can significantly reduce the embodied emissions in China’s export trade. The mechanism analysis shows that the functional upgrading of the value chain driven by the improvement of the quality of foreign investment mainly plays a role in reducing the embodied emissions in China’s export trade through the optimization effect of factor structure, the effect of human capital accumulation and the effect of service demand creation. Extended analysis finds that high-quality foreign investment engaged in upstream functional activities and inflows into eastern China have more obvious inhibitory effects on the embodied emissions in export trade. At the same time, the functional upgrading of the value chain is more conducive to reducing the embodied emissions in export trade in pollution-intensive manufacturing industries. This paper verifies the “pollution halo” effect of high-quality foreign investment, and provides strong support for China to attract and utilize foreign investment more vigorously and promote high-level opening up under the new situation.

Keywords: functional upgrading of value chains; greenfield investment; FDI quality; carbon emissions embodied in exports (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:bpj:cferev:v:13:y:2024:i:4:p:106-128:n:1006

DOI: 10.1515/cfer-2024-0024

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