Foreign Direct Investment, Environmental Regulation and Environmental Pollution

This paper constructs a simultaneous model to assess the effect of foreign direct investment (FDI) on the environment. The results show: in 1992-2006, FDI entry enlarged China’s industrial production scale, which increased pollution emission. At the same time, FDI entry also reduced pollution emission through optimizing economic structure and improving technology. As a result, the total effect of FDI on environment is small and positive. In addition, the weaker environmental regulation is one of the main factors attracting FDI, which indicates there is a pollution haven effect in China, but China wasn’t thepollution haven.