How does foreign direct investment improve urban air quality?

Foreign direct investment and environmental pollution have been a prominent topic in China’s economic development. Therefore, this paper investigates the relationship between foreign direct investment and environmental pollution, and makes practical policy recommendations to support the harmonious development of economy and environment based on the study findings. In this paper, the spatial econometric approach framework with the spatial weight matrix of the Delaunay method is used to examine the influence of foreign direct investment on the level of urban air quality. It uses air quality index as an indicator to measure air pollution comprehensively. Based on the spatial autocorrelation with the aggregation and radiation effects of foreign direct investment, the results show that the distribution of air pollution has considerable spatial impact in terms of spatial nonequilibrium. Through the empirical analysis, our finding reveals that the increase in GDP, the share of secondary industry, and population growth are the important elements affecting the change in air quality.