Has foreign direct investment increased air pollution in China? A hierarchical linear model approach

Focusing on the mechanism of foreign direct investment on environment, we attempt to build a series of hierarchical linear models to explore the impact of foreign direct investment on China's sulfur dioxide (SO2) emissions by using the panel data of industrial sector in Chinese provinces from 2002 to 2013. The findings show that: Firstly, the industrial SO2 emission shows a slow downward trend. Secondly, 27.96% of the variations of SO2 emission intensity come from the differences between the provinces. Thirdly, foreign direct investment can explain 50.50% of the different changes in provincial SO2 emission intensity due to economic scale effect, structural effect, technological effect, and environmental regulation effect. Among them, the scale effect and technical effect are negatively correlated with SO2 emissions intensity, while structural and environmental regulation effects positively. Moreover, foreign direct investment can significantly inhibit the positive correlation of structural effect and weaken the negative correlation of technology effect on SO2 emission intensity, but do not have a significant impact on SO2 emission intensity by economic scale effect and environmental regulation effect.