Skip to main content
SpringerLink
Log in

The role of environmental regulation, industrial upgrading, and resource allocation on foreign direct investment: evidence from 276 Chinese cities

  • Research Article
  • Published:
Environmental Science and Pollution Research Aims and scope Submit manuscript

Abstract

Environmental pollution is becoming more and more prevalent in China, accompanied by the excessive expansion of the country’s foreign direct investment in the scale of resource-based industries. This article uses the panel data of 276 prefecture-level cities in China from 2003 to 2016 to estimate the impact of environmental regulation on foreign direct investment by employing the spatial Durbin model. The empirical results show that firstly, environmental regulation, and foreign direct investment have an obvious spatial correlation. Secondly, environmental regulation significantly inhibits foreign direct investment and has significant negative space spillover. Thirdly, non-eastern cities’ environmental regulation has significantly greater inhibitory effects on foreign direct investment than eastern cities, and the key cities’ environmental regulation has greater inhibitory effects than ordinary cities. Finally, from the perspective of industrial upgrading and resource configuration and environmental regulation has significantly promoted foreign direct investment and has significant negative space spillovers. Therefore, the reasonable use of environmental regulatory measures through industrial upgrading and resource configuration to attract clean, capital-intensive, and technology-intensive enterprises and to achieve the effect of “decontamination and clean” for foreign-funded enterprises is critical.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Log in via an institution

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Institutional subscriptions

Fig. 1
Fig. 2
Fig. 3
Fig. 4
Fig. 5

Similar content being viewed by others

Availability of data and materials

All data generated or analyzed during this study are included in this article.

References

  • Ahmad B, Da L, Asif MH, Irfan M, Ali S, Akbar MIUD (2021) Understanding the antecedents and consequences of service-sales ambidexterity: a motivation-opportunity-ability (MOA) framework. Sustainability 13(17):9675

    Article  Google Scholar 

  • Ali S, Yan Q, Sajjad Hussain M, Irfan M, Ahmad M, Razzaq A, Işık C (2021) Evaluating Green Technology Strategies for the sustainable development of solar power projects: evidence from Pakistan. Sustainability 13(23):12997

    Article  Google Scholar 

  • Blalock G, Gertler PJ (2008) Welfare gains from foreign direct investment through technology transfer to local suppliers. J Int Econ 74(2):402–421

    Article  Google Scholar 

  • Borsatto JMLS, Amui LBL (2019) Green innovation: unfolding the relation with environmental regulations and competitiveness. Resour Conserv Recycl 149:445–454

    Article  Google Scholar 

  • Cai X, Lu Y, Wu M, Yu L (2016) Does environmental regulation drive away inbound foreign direct investment? Evidence from a quasi-natural experiment in China. J Dev Econ 123:73–85

    Article  Google Scholar 

  • Chien F, Ngo QT, Hsu CC, Chau KY, Mohsin M (2021) Assessing the capacity of renewable power production for green energy system: a way forward towards zero carbon electrification. Environ Sci Pollut Res 28(46):65960–65973

    Article  Google Scholar 

  • DIMELIS*, S. P. 2005 DIMELIS* S P 2005 Spillovers from foreign direct investment and firm growth: Technological, financial and market structure effects Int J Econ Bus 12 1 85 104

  • Du, K., Cheng, Y., & Yao, X. 2021. Environmental regulation, green technology innovation, and industrial structure upgrading: the road to the green transformation of Chinese cities. Energy Economics, 98, 105247.

  • Elavarasan, R. M., Pugazhendhi, R., Irfan, M., Mihet-Popa, L., Campana, P. E., & Khan, I. A. 2021. A novel Sustainable Development Goal 7 composite index as the paradigm for energy sustainability assessment: a case study from Europe. Applied Energy, 118173.

  • Fang, Z., Razzaq, A., Mohsin, M., & Irfan, M. 2021. Spatial spillovers and threshold effects of internet development and entrepreneurship on green innovation efficiency in China. Technology in Society, 101844.

  • Hao, Y., Gai, Z., & Wu, H. 2020. How do resource misallocation and government corruption affect green total factor energy efficiency? Evidence from China. Energy Policy, 143, 111562.

  • Hsu, C. C., Quang-Thanh, N., Chien, F., Li, L., & Mohsin, M. 2021. Evaluating green innovation and performance of financial development: mediating concerns of environmental regulation. Environmental Science and Pollution Research, 1–12.

  • Huang LX, Wang Z, Wang XB (2021) Research on the impact and mechanism of local economic growth targets on foreign direct investment. International Economics and Trade Exploration 02:51–66

    Google Scholar 

  • Irfan M, Zhao ZY, Li H, Rehman A (2020) The influence of consumers’ intention factors on willingness to pay for renewable energy: a structural equation modeling approach. Environ Sci Pollut Res 27(17):21747–21761

    Article  Google Scholar 

  • Irfan M, Zhao ZY, Rehman A, Ozturk I, Li H (2021b) Consumers’ intention-based influence factors of renewable energy adoption in Pakistan: a structural equation modeling approach. Environ Sci Pollut Res 28(1):432–445

    Article  Google Scholar 

  • Irfan, M., Elavarasan, R. M., Hao, Y., Feng, M., & Sailan, D. 2021a. An assessment of consumers’ willingness to utilize solar energy in China: end-users’ perspective. Journal of Cleaner Production, 292, 126008.

  • Islam, M. M., Muhammad, I., Shahbaz, M., & Vo, X. V. 2021. Renewable and non-renewable energy consumption in Bangladesh: the relative influencing profiles of economic factors, urbanization, physical infrastructure and institutional quality. Renewable Energy.

  • Jaffe AB, Palmer K (1997) Environmental regulation and innovation: a panel data study. Rev Econ Stat 79(4):610–619

    Article  Google Scholar 

  • Jin H, Qian Y, Weingast BR (2005) Regional decentralization and fiscal incentives: Federalism, Chinese style. J Public Econ 89(9–10):1719–1742

    Article  Google Scholar 

  • Kim Y, Rhee DE (2019) Do stringent environmental regulations attract foreign direct investment in developing countries? Evidence on the “Race to the Top” from cross-country panel data. Emerg Mark Financ Trade 55(12):2796–2808

    Article  Google Scholar 

  • Kneller R, Pisu M (2007) Industrial linkages and export spillovers from FDI. World Economy 30(1):105–134

    Article  Google Scholar 

  • Li M, Li C, Zhang M (2018) Exploring the spatial spillover effects of industrialization and urbanization factors on pollutants emissions in China’s Huang-Huai-Hai region. J Clean Prod 195:154–162

    Article  CAS  Google Scholar 

  • Li Y, Yang X, Ran Q, Wu H, Irfan M, Ahmad M (2021) Energy structure, digital economy, and carbon emissions: evidence from China. Environ Sci Pollut Res 28(45):64606–64629

    Article  Google Scholar 

  • Liu, H., Khan, A. R., Aslam, S., Rasheed, A. K., & Mohsin, M. 2021. Financial impact of energy efficiency and energy policies aimed at power sector reforms: mediating role of financing in the power sector. Environmental Science and Pollution Research, 1–14.

  • Miao Z, Baležentis T, Tian Z, Shao S, Geng Y, Wu R (2019) Environmental performance and regulation effect of China’s atmospheric pollutant emissions: evidence from “three regions and ten urban agglomerations.” Environ Resource Econ 74(1):211–242

    Article  Google Scholar 

  • Mohsin, M., Bashir, S., Baloch, Z. A., & Hafeez, M. 2021. Assessment of sustainability and uncertainties of oil markets: mediating determinants of energy use and CO2 emissions. Environmental Science and Pollution Research, 1–14.

  • Porter ME, Van der Linde C (1995) Toward a new conception of the environment-competitiveness relationship. Journal of Economic Perspectives 9(4):97–118

    Article  Google Scholar 

  • Pradhan RP, Arvin MB, Norman NR (2015) The dynamics of information and communications technologies infrastructure, economic growth, and financial development: Evidence from Asian countries. Technol Soc 42:135–149

    Article  Google Scholar 

  • Tang, K., Qiu, Y., & Zhou, D. (2020). Does command-and-control regulation promote green innovation performance? Evidence from China’s industrial enterprises. Science of the Total Environment, 712, 136362.

  • Tanveer A, Zeng S, Irfan M, Peng R (2021) Do perceived risk, perception of self-efficacy, and openness to technology matter for solar PV adoption? An application of the extended theory of planned behavior. Energies 14(16):5008

    Article  CAS  Google Scholar 

  • Tobler WR (1970) A computer movie simulating urban growth in the Detroit region. Econ Geogr 46(sup1):234–240

    Article  Google Scholar 

  • Tong J, Liu W, Xue J (2016) Environmental regulation, factor input structure and industrial transformation. Econ Res J 7:43–57

    Google Scholar 

  • Wang J, Liu B (2014) Environmental regulation and enterprise total factor productivity: an empirical analysis based on data from Chinese industrial enterprises. China Industrial Economy 3:44–56

    CAS  Google Scholar 

  • Wang XC, Klemeš JJ, Dong X, Fan W, Xu Z, Wang Y, Varbanov PS (2019) Air pollution terrain nexus: a review considering energy generation and consumption. Renew Sustain Energy Rev 105:71–85

    Article  CAS  Google Scholar 

  • Wen DW, Xian GM, Ma J (2009) FDI, industrial structure changes and China’s export competitiveness. Manage World 04:96–107

    Google Scholar 

  • Wu H, Xia Y, Yang X, Hao Y, Ren S (2021b) Does environmental pollution promote China’s crime rate? A new perspective through government official corruption. Struct Chang Econ Dyn 57:292–307

    Article  Google Scholar 

  • Wu, H., Hao, Y., & Ren, S. (2020). How do environmental regulation and environmental decentralization affect green total factor energy efficiency: evidence from China. Energy Economics, 91, 104880.

  • Wu, H., Xu, L., Ren, S., Hao, Y., & Yan, G. 2020. How do energy consumption and environmental regulation affect carbon emissions in China? New evidence from a dynamic threshold panel model. Resources Policy, 67, 101678.

  • Wu, H., Ba, N., Ren, S., Xu, L., Chai, J., Irfan, M., ... & Lu, Z. N. (2021). The impact of internet development on the health of Chinese residents: transmission mechanisms and empirical tests. Socio-Economic Planning Sciences, 101178.

  • YANG, Y., NIU, G., TANG, D., & ZHU, M. 2019. Does environmental regulation affect the introduction of foreign direct investment in China. Empirical research based on the spatial Durbin model. Polish Journal of Environmental Studies, 28 (1), 415.

  • Yang, X., Wang, J., Cao, J., Ren, S., Ran, Q., & Wu, H. 2021. The spatial spillover effect of urban sprawl and fiscal decentralization on air pollution: evidence from 269 cities in China. Empirical Economics, 1–29.

  • Yao Y, Chen GS, Zhang L (2021) Local financial intermediation and foreign direct investment: evidence from China. Int Rev Econ Financ 72:198–216

    Article  Google Scholar 

  • Yu, X., & Li, Y. 2020. Effect of environmental regulation policy tools on the quality of foreign direct investment: an empirical study of China. Journal of Cleaner Production, 270, 122346.

  • Yuan YJ, Xie RH (2014) Research on the industrial structure adjustment effect of environmental regulation: an empirical test based on China’s provincial panel data. China Industrial Economy 08:57–69

    Google Scholar 

  • Zhang, J., Kang, L., Li, H., Ballesteros-Pérez, P., Skitmore, M., & Zuo, J. 2020. The impact of environmental regulations on urban Green innovation efficiency: the case of Xi’an. Sustainable Cities and Society, 57, 102123.

  • Zheng, Y. 2007. De facto federalism in China: reforms and dynamics of central-local relations (Vol. 7). World Scientific.

  • Zhou WW, Li XP, Li J (2020) The spatial spillover effect of infrastructure construction on total factor productivity: a research-based on panel data of 271 prefecture-level cities under the background of the “One Belt and One Road.” Exploration of Economic Issues 06:64–76

    Google Scholar 

  • Zhu PF, Zhang ZY, Jiang GL (2011) FDI and environmental regulation: an empirical study based on the perspective of decentralization. Econ Res 06:133–145

    Google Scholar 

Download references

Funding

The authors acknowledge financial support from the Special project for national and regional research of colleges and universities of the Ministry of Education (planning project): Research on high-quality development of China-Central Asia-West Asia Economic Corridor in the Context of the Belt and Road Initiative (2020-G70) and Xinjiang Social Science Fund Project (20BJL062).

Author information

Authors and Affiliations

  1. School of Public Administration, Xinjiang University of Finance and Economics, Urumchi, 830012, Xinjiang, China

    Wei Qiu & Yaojun Bian

  2. School of Marxism, Northwest A&F University, Yangling, 712100, Shaanxi, China

    Jinwei Zhang

  3. School of Management and Economics, Beijing Institute of Technology, Beijing, 100081, China

    Muhammad Irfan

  4. Center for Energy and Environmental Policy Research, Beijing Institute of Technology, Beijing, 100081, China

    Muhammad Irfan

  5. Department of Business Administration, ILMA University, Karachi, 75190, Pakistan

    Muhammad Irfan

Authors
  1. Wei Qiu
    View author publications

    You can also search for this author in PubMed Google Scholar

  2. Yaojun Bian
    View author publications

    You can also search for this author in PubMed Google Scholar

  3. Jinwei Zhang
    View author publications

    You can also search for this author in PubMed Google Scholar

  4. Muhammad Irfan
    View author publications

    You can also search for this author in PubMed Google Scholar

Contributions

WQ: conceptualization, writing—original draft, formal analysis, data handling, and methodology. YB: supervision, funding acquisition. JZ: writing—review and editing, MI: supervision, writing—review and editing, variable construction.

Corresponding authors

Correspondence to Jinwei Zhang or Muhammad Irfan.

Ethics declarations

Ethics approval and consent to participate

Not applicable

Consent for publication

Not applicable

Competing interests

The authors declare no competing interests.

Additional information

Responsible Editor: Nicholas Apergis

Publisher's note

Springer Nature remains neutral with regard to jurisdictional claims in published maps and institutional affiliations.

Rights and permissions

Reprints and permissions

About this article

Check for updates. Verify currency and authenticity via CrossMark

Cite this article

Qiu, W., Bian, Y., Zhang, J. et al. The role of environmental regulation, industrial upgrading, and resource allocation on foreign direct investment: evidence from 276 Chinese cities. Environ Sci Pollut Res 29, 32732–32748 (2022). https://doi.org/10.1007/s11356-022-18607-2

Download citation

  • Received:

  • Accepted:

  • Published:

  • Issue Date:

  • DOI: https://doi.org/10.1007/s11356-022-18607-2

Keywords

Search

Navigation