Environmental regulation and foreign direct investment: Evidence from China's outward FDI

This paper investigates whether environmental regulation affects patterns of foreign direct investment (FDI) and how such patterns change across time, industries, and destination countries. We examine the pattern of Chinese FDI outflow over 2008-2018 and apply difference -indifferences estimation to circumvent other potential confounders. As a result, we find evidence that host countries with more relaxed environmental regulations attract foreign direct investment from polluting industries. However, the preference for destinations with lax regulations has been weakened among China's multinational enterprises since the promotion of the Belt and Road Initiative began in 2013.

Automated summary

The study found that countries with relaxed environmental regulations are more likely to attract foreign direct investment from polluting industries. However, the preference of China's multinational enterprises for destinations with lax regulations has shifted since the promotion of the Belt and Road Initiative.