Digital Economy, Foreign Direct Investment, and Environmental Pollution: Empirical Evidence from China

Huihui Li (), Yibing Ding (), Fan Bie (), Muhammad Shahbaz () and Vasilii Erokhin ()
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Huihui Li: Jilin University
Yibing Ding: Jilin University
Fan Bie: Yangtze University
Muhammad Shahbaz: Beijing Institute of Technology
Vasilii Erokhin: Harbin Engineering University

Journal of the Knowledge Economy, 2025, vol. 16, issue 2, No 162, 10451 pages

Abstract: Abstract This study examines the spatial relationship and regional variations between the digital economy, FDI, and environmental pollution in eleven provinces and cities along China’s Yangtze River Economic Belt from 2010 to 2020. Utilizing the entropy weighting method, a comprehensive environmental pollution index is constructed to assess variations in environmental quality among different provinces. The study employs the Spatial Durbin Model (SDM) along with mediation and threshold models to analyze both direct and spillover effects of the digital economy and FDI on environmental pollution. The findings reveal that the digital economy significantly reduces environmental pollution by promoting green technologies and improving resource efficiency, though this impact varies spatially across regions. FDI exhibits a dual effect on environmental pollution, where it can both transfer advanced technologies to reduce pollution and relocate polluting industries to areas with lax regulations. This study expands the existing literature by providing a detailed spatial analysis of the digital economy and FDI’s impact on environmental pollution, highlighting regional disparities and the importance of spatial heterogeneity. The policy implications suggest establishing a comprehensive environmental monitoring network, formulating green standards for the digital economy, and implementing stricter environmental approval processes for FDI projects to promote sustainable development and improve environmental governance. The study also opens avenues for future research to explore these dynamics in other regions and contexts, further validating and expanding upon the findings. Overall, this research provides new insights into the complex interactions between economic activities and environmental sustainability, emphasizing the need for region-specific policies to effectively address environmental challenges.

Keywords: Digital economy; Foreign direct investment; Environmental pollution; Dynamic Spatial Durbin Model; Regional heterogeneity (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1007/s13132-024-02282-4

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