Does China’s corporate two-way foreign direct investment mitigate environmental pollution?

Feng Yang, Tingwei Chen, Linlin Han and Susu Wang

PLOS ONE, 2025, vol. 20, issue 10, 1-20

Abstract: The global push for low-carbon growth highlights the urgent need to examine how corporate internationalization shapes environmental performance. However, the environmental implications of corporate two-way foreign direct investment (CTFDI, integrating inward and outward FDI) remain insufficiently explored. This study investigates whether CTFDI mitigates corporate pollution emissions in line with the pollution halo hypothesis. This study employs a multiple fixed-effects OLS model using 43,410 firm-year observations from 2,894 A-share listed Chinese firms over 2008–2022. The results indicate that CTFDI significantly reduces emissions, with a one-unit increase associated with an average 0.15% decline. Mechanism analysis demonstrates that research and development investment and the adoption of digital and intelligent technologies are primary channels through which CTFDI exerts this effect. Heterogeneity analysis further reveals that non-state-owned enterprises and firms in non-polluting industries experience more pronounced benefits. Overall, the findings provide robust empirical evidence supporting the pollution halo hypothesis from the perspective of two-way FDI and highlight the role of economic openness in advancing green corporate development.

Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:plo:pone00:0333935

DOI: 10.1371/journal.pone.0333935

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