Does China's Corporate Two-way FDI Behavior Mitigate Environmental Pollution?

This study investigates the environmental effects of corporate two-way foreign direct investment behavior (CTFDI) using a panel dataset of 43,410 observations from 2,894 A-share listed Chinese corporations over the period from 2008 to 2022. Employing a multiple fixed-effects model, the results show that CTFDI significantly reduces environmental pollution.

Mechanism analysis suggestes that increased R&D investment and the adoption of digital and intelligent technologies are key channels through which CTFDI achieves this effect. Heterogeneity analysis reveals that the environmental benefits of CTFDI are more pronounced among non-state-owned enterprises and firms operating in non-polluting industries. These findings provide empirical support for the link between economic openness and pollution reduction and lends credence to the pollution halo hypothesis from the perspective of two-way FDI.