JOURNAL OF REGIONAL SCIENCE, VOL. 51, NO. 1, 2011, pp. 121–138
GROWTH, FOREIGN DIRECT INVESTMENT, AND THE
ENVIRONMENT: EVIDENCE FROM CHINESE CITIES
Matthew A. Cole
Department of Economics, University of Birmingham, Edgbaston, Birmingham, B15 2TT,
United Kingdom. E-mail: m.a.cole@bham.ac.uk
Robert J.R. Elliott
Department of Economics, University of Birmingham, Edgbaston, Birmingham, B15 2TT,
United Kingdom. E-mail: r.j.elliott@bham.ac.uk.
Jing Zhang
School of Contemporary Chinese Studies, University of Nottingham, Nottingham, NG7 2RD,
United Kingdom. E-mail: j.zhang@nottingham.ac.uk.
ABSTRACT. In this paper, we investigate the relationship between economic growth and industrial
pollution emissions in China using data for 112 major cities between 2001 and 2004. Using disaggregated data, we separate foreign direct investment inflows from Hong Kong, Macao, and Taiwan from
those of other foreign economies. We examine two industrial water pollution indicators (wastewater
and petroleum-like matter) and four industrial air pollution indicators (waste gas, sulfur dioxide, soot,
and dust). Our results suggest that most air and water emissions rise with increases in economic
growth at current income levels. The share of output of domestic- and foreign-owned firms increases
several pollutants in a statistically significant manner while output of firms from Hong Kong, Macao,
and Taiwan either reduces pollution or is statistically insignificant.
1. INTRODUCTION
In recent years, China has experienced rapid economic growth enhanced by large
investment flows from abroad. Since 2000, economic growth rates have consistently exceeded 8 percent (World Bank, 2007). China now receives more foreign direct investment
(FDI) than any other developing economy and by 2005 ranked among the world’s top three
recipients with inflows of $72 billion (UNCTAD, 2007). However, these economic gains
have come at a cost. Seventeen of the 25 most polluted cities in the...