Environmental Impact of Foreign vs. Domestic Capital Investment in China


  • Boqiong Yang,

  • Stephan Brosig,

  • Jianguo Chen

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    •  Boqiong Yang is a Post-Doctorate in the School of Environment, Tsinghua University, Beijing, China. E-mail: yangboqiong@yahoo.cn for correspondence. Stephan Brosig is a Research Associate in the Dept. Agricultural Markets, Marketing and World Agricultural Trade, Leibniz Institute of Agricultural Development in Central and Eastern Europe, Halle (Saale), Germany. Jianguo Chen is a Professor in the School of Economics, Nankai University, Tianjin, China. The authors would like to thank the anonymous editors, and Luo (CCAP, China) and Zhao (IAMO, Germany) for their help and suggestions. This paper is supported by NSFC China (NO. 71203111) ‘FDI policy in China from the environment aspect’.


We compare environmental impacts associated with incoming foreign direct investment vs. domestic capital in China. We use aggregate data on Chinese provinces’ economic and pollution indicators to explore the effects of the financial origin of fixed capital. Our simultaneous models consider three prime channels through which these effects work: economic scale, sectoral composition and pollution intensity. Results show that emissions associated with foreign-financed capital are lower than with domestically financed capital for some but not all of the considered types of pollution.