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Environmental regulation, foreign direct investment and China’s economic development under the new normal: restrain or promote?

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Abstract

Environmental resources play an extremely important role in economic development. In the context of China’s economic development entering a new normal, attaching importance to environmental protection and strengthening environmental regulations will have an important impact on the original foreign direct investment (FDI) and China’s economic development. Therefore, this paper combines the characteristics of the “new normal” of China’s economic development, takes 30 provinces in China from 2008 to 2017 as the research object, and uses the PVAR model and impulse response function to re-verify the interaction mechanism and path among environmental regulation, FDI and high-quality economic development. The study found that: (1) There is an obvious mutual promotion relationship between environmental regulations and the quality of China’s economic development and economic development environment. Strengthening environmental regulation is conducive to the realization of China’s economic "new normal" development goal. (2) Although the strengthening of environmental regulation will have a significant constraint effect on FDI and China’s economic growth rate, but the effect is relatively small. (3) FDI and economic growth rate variables are mutually motivated and promote each other, but both of them have a significant inhibitory effect on regional environmental regulation. In general, under the background of the “new normal” of China’s economic development, appropriately increasing the intensity of environmental regulation is not only conducive to environmental protection and promoting high-quality and sustainable economic development, but also can serve the purpose of guiding the structure of foreign investment and transforming the mode of economic growth.

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Acknowledgements

The research work was supported by the Fundamental Research Funds for the Universities in Hebei Province in 2022, No. QN202228. The title is “Mineral Resources Balance Sheet Preparation and Application Research in Hebei Province”. The research work was supported by National Social Science Foundation in China, No.18BGL185. The title is “Coupling Mechanism of Environmental Regulation and Corporate Environmental Responsibility and Regional Heterogeneity”.

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Authors and Affiliations

  1. Postdoctoral Mobility Station, School of Economics, Peking University, Beijing, 100871, China

    Long Chen

  2. Post-doctoral Research Station, Bank of Hebei Co., Ltd., Shijiazhuang, 050011, Hebei Province, China

    Long Chen

  3. School of Management, Hebei GEO University, Shijiazhuang, 050031, Hebei Province, China

    Long Chen, Nan Wang & Wenjun Zhou

  4. Strategy and Management Base of Mineral Resources in Hebei Province, Hebei GEO University, Shijiazhuang, 050031, Hebei Province, China

    Long Chen, Nan Wang & Wenjun Zhou

  5. School of Business Administration, Jeonbuk National University, Jeonju, Korea

    Qiyun Li

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  1. Long Chen
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Contributions

Conceptualization and methodology, LC, NW, and QL; formal analysis, WZ and QL; writing—original draft preparation, LC, and NW; writing—review and editing, LC, NW, and WZ; supervision, LC, QL, and WZ All authors read and agreed to the published version of the manuscript.

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Correspondence to Nan Wang.

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Chen, L., Wang, N., Li, Q. et al. Environmental regulation, foreign direct investment and China’s economic development under the new normal: restrain or promote?. Environ Dev Sustain 25, 4195–4216 (2023). https://doi.org/10.1007/s10668-022-02239-0

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