Foreign direct investment, environmental regulation, and haze pollution: empirical evidence from China

As China’s economy continues to grow, more and more attention is being paid to environmental pollution issues, including haze pollution, which is the most prominent of the air problems. In order to alleviate the haze pollution problem while ensuring the normal operation of the economy, the government has adopted an environmental regulation policy along with the introduction of foreign direct investment. This study uses a fixed effects model and two-stage least squares to examine the correlation of foreign direct investment and environmental regulation to the haze pollution level by using the Chinese provincial panel data from 2008 to 2019. We found a positive interaction between the foreign direct investment and environmental regulation, where a high-quality investment promotes the haze reduction, and the environmental regulation can enhance this effect. The results approve the possibilities that China can bring the merit investment and reduce its air pollution simultaneously, but how to balance the interaction between environmental regulation and the investment needs to draw attention.