The impact of two-way foreign direct investment on industrial green development: perspective of international cooperation on production capacity in China

Li Li (), Hui Yong () and Zhenhua Zhang ()
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Li Li: Shihezi University
Hui Yong: Ministry of Water Resources
Zhenhua Zhang: Lanzhou University

Economic Change and Restructuring, 2025, vol. 58, issue 2, No 8, 25 pages

Abstract: Abstract Industrial green development (IGD) has emerged as a crucial prerequisite for high-quality economic progress. Against the backdrop of international cooperation on production capacity, two-way foreign direct investment (FDI) has become a decisive factor shaping IGD. Drawing on China’s provincial panel data from 2009 to 2019, this paper develops a dynamic panel model and an intermediary effect model to conduct an empirical analysis of the relationship and underlying mechanisms between two-way FDI and China’s IGD. The findings show that: (1) The two-way FDI interaction significantly enhances IGD, whereas OFDI (outward foreign direct investment) and IFDI (inward foreign direct investment) individually exert a negative effect. (2) Pronounced regional heterogeneity presents in the influence of two-way FDI on IGD, with coastal areas being most affected, followed by inland and border regions. (3) Two-way FDI facilitates China’s IGD through green technology spillover and alleviating capital misallocation. The present research contributes to the understanding of two-way FDI and green development in the industrial sector of developing countries from a macro-perspective, and offers significant insights for enhancing the efficiency of foreign capital utilization, foreign investment, and IGD in developing nations.

Keywords: Industrial green development; Foreign direct investment; Green technology spillover; Capital misallocation; International cooperation (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1007/s10644-025-09866-3

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