The impact of FDI on urban PM2.5 pollution in China: The mediating effect of industrial structure transformation

Abstract

With the rapid growth of foreign direct investment (FDI), PM2.5 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 PM2.5 pollution and the effect of FDI on urban PM2.5 concentrations, as mediated by industrial structure transfor-mation, which is clarified using Stata/SE 16.0. The results showed that PM2.5 pollution in China has significant spatial spillover effects, and the pollution haven hypothesis is applicable to Chinese cit-ies. The industrial structure partially mediates the relationship between FDI and PM2.5. 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 philos-ophy of only reducing the existing emissions. A top‐level design and sound market supervision system of PM2.5 control are also needed.