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Environmental regulation, foreign direct investment, and export sophistication of China: an empirical study based on dynamic system GMM and threshold model

  • Energy-Water-Climate Governance from Interdisciplinary Perspectives
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Abstract

The mechanism of how environmental regulations (ERs) affect export sophistication (ES) is complex, and for many years, it has been a hot topic for researchers. However, few previous studies have focused on whether ERs can promote the upgrading of China’s ES through foreign direct investment (FDI). To address this research gap, in this study, ERs, FDI, and ES were incorporated into one novel research framework. Based on the provincial panel data of China for the period ranging from 2004 to 2016, the system generalized method of moments (SYS-GMM) was utilized to analyze the mutual relationship between FDI, ERs, and ES. Then, the panel threshold model was employed to empirically investigate the upgrading of the ES that is determined by FDI under different-intensity ERs. The results were as follows: First, ERs lead the influx of foreign capital to China, as a “pollution shelter” of developed countries, but excessive ERs have negative effects on FDI, resulting in an inverted U-shaped relationship between ERs and FDI. Second, the upgrading of the ES was affected by FDI, with the trend following a U-shaped curve. Third, the ERs have significant direct effects on the upgrading of the ES in the form of a U-shaped relationship, which was determined by the combined “innovation compensation” and “cost offset” effects. Finally, the environmental regulations had indirect influences on the upgrading of the export sophistication through the linkage effect of FDI in the form of an N-shaped relationship. Based on the aforementioned achievements, some policy recommendations were proposed to promote the upgrading of the ES in the future.

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Data availability

The datasets used and/or analyzed during the current study are available from the corresponding author on reasonable request.

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Authors and Affiliations

  1. Research Institute of Economics and Management, Southwestern University of Finance and Economics, Chengdu, 611130, Sichuan, China

    Hongji Wang

  2. School of Economics, Southwestern University of Finance and Economics, Chengdu, 611130, Sichuan, China

    Mai Yang

  3. Suzhou Construction Group Co., LTD, Suzhou, 215122, Jiangsu, China

    Rui He

  4. Institute of Industrial Economics, Jinan University, Guangzhou, 510632, Guangdong, China

    Peng Zheng

Authors
  1. Hongji Wang
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  2. Mai Yang
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  3. Rui He
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  4. Peng Zheng
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Contributions

Hongji Wang: Methodology, writing—original draft. Mai Yang: Conceptualization. Rui He: Data curation. Peng Zheng: Writing—review and editing, supervision.

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Correspondence to Peng Zheng.

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Supplementary information

ESM 1.

Figure S1: Different intensity of ERs in 2004, 2008, 2012 and 2016 (related to direct effect of ERs on the upgrading of the ES); Figure S2: Different intensity of ERs in 2004, 2008, 2012 and 2016 (related to indirect effects of ERs on the upgrading of the ES through the linkage effect of FDI. (RAR 1943 kb)

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Wang, H., Yang, M., He, R. et al. Environmental regulation, foreign direct investment, and export sophistication of China: an empirical study based on dynamic system GMM and threshold model. Environ Sci Pollut Res 29, 72090–72100 (2022). https://doi.org/10.1007/s11356-021-14833-2

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  • DOI: https://doi.org/10.1007/s11356-021-14833-2

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