Does environmental regulation affect inward foreign direct investment? Evidence from China

Abstract

Due to the combined pressures of reducing carbon emissions and enhancing high-quality international trade, the influence of environmental regulations on foreign direct investment has to be assessed. This study focused on China's low-carbon cities development and analysed city-level panel data from 2003 to 2019 using a multi-period difference-in-differences approach to investigate its impact on foreign direct investment. The findings suggest that the implementation of the low-carbon cities policy resulted in both a reduction in the number of foreign-invested enterprises and a less effective utilization of foreign direct investment. Furthermore, western China was more profoundly affected. Finally, some valuable recommendations are presented.