Does Foreign Direct Investment Affect Green Growth? Evidence from China's Experience

Foreign Direct Investment (FDI) not only affects the economic growth but also affects the environmental protection of the host country. With China's background of pursuing green growth, we need to consider the performance of FDI from the economic and environmental benefit aspects. On this basis, using slacks-based measure directional distance function (SBMDDF) to build up green growth efficiency, economic efficiency and environmental efficiency indexes, empirical research on FDI in 104 Chinese cities from 2004 to 2011 has shown that: (1) Different cities have differences in their green growth efficiency. Shenzhen city is always efficient in green economic growth. (2) Overall, FDI is positive on Chinese cities' green growth. (3) When the green growth efficiency is broken down into economic efficiency and environmental efficiency, FDI promotes China's economic green growth through both environmental benefits and economic benefits. (4) The effect of FDI differs in different sectors. FDI in the emission-intensive sector promotes green efficiency mainly through the improvement of economic efficiency. FDI in the non-emission-intensive sector promotes economic efficiency, environmental efficiency and green efficiency. © 2016 by the authors.