The Impact of FDI on Urban PM(2.5) Pollution in China: The Mediating Effect of Industrial Structure Transformation

With the rapid growth of foreign direct investment (FDI), PM(2.5) pollution in Chinese cities is increasing. Based on panel data for 271 Chinese cities from 2003 to 2016, this paper uses the dynamic spatial fixed-effects Durbin model to analyze the correlation between FDI and PM(2.5) pollution and the effect of FDI on urban PM(2.5) concentrations, as mediated by industrial structure transformation, which is clarified using Stata/SE 16.0. The results showed that PM(2.5) pollution in China has significant spatial spillover effects, and the pollution haven hypothesis is applicable to Chinese cities. The industrial structure partially mediates the relationship between FDI and PM(2.5). This paper proposes that local governments should promote the market-oriented reform of FDI to create a more convenient, legalized, and international environment for FDI and innovate the governance philosophy of only reducing the existing emissions. A top-level design and sound market supervision system of PM(2.5) control are also needed.