Does outward foreign direct investment (OFDI) affect the home country's environmental quality? The case of China

In this study, the provincial panel data of 29 provinces in China from 2003 to 2016 were selected to conduct an empirical study on the impact of China's outward foreign direct investment (OFDI) on domestic carbon dioxide emissions. The three major effects of OFDI on environmental pollution in the home country, namely scale effect, technical effect and composition effect, are estimated by a single equation model and simultaneous equation model. The results show that China's OFDI has increased domestic environmental pollution by improving economic scale (scale effect). However, the reverse technology spillover effect brought by OFDI has improved the domestic technology level (technical effect) and optimized the domestic industrial structure (composition effect), thereby reducing domestic environmental pollution. Based on the research results, this paper puts forward relevant policy suggestions for the government.