Foreign Economy and Carbon Emissions: A Verification From Threshold Effect of Development Disparity in China


Since the proposal of China’s biggest cross-border project (Belt & Road Initiative), China's foreign trade and investment have experienced rapid growth, making the correlation between economic growth, external economic activities, and environmental pollution in China has been a focusing issue. On that basis, the non-linear relationship between China's foreign investment and trade, and level of carbon emissions will be conducted based on a panel data of 30 administrative divisions in 2003-2017. Specifically, the threshold regression model with fixed effects is applied to verify how’s the threshold variables of economic growth and technique investment will impact such relationship as structural breaks. Consequently, given sustainability and emission reduction in China, the empirical results first suggest that outbound investment & trade activities with a higher level of domestic economic growth or technique investment can significantly help reduce carbon emissions through technology feedback in China (i.e., marginal increase in China’s outward investment will emit less domestic emission level when GDP (Gross Domestic Product) exceeds 18542.395 Chinese yuan/per). In particular, based on the spatial-temporal features of threshold variables, it is supported that less developed areas in economic growth and technique investment like Southwest and Northwest China (i.e., Guizhou, Guangxi, Xinjiang, and Qinghai in this study) are empirically supposed to actively seek overseas economic cooperation in low carbon industries, and central government should also give more policy priority to those regions to help them to cross the threshold of economic development, to achieve a low-carbon and sustainable development.

Author Information
Zhiguang Song, Sophia University, Japan

Paper Information
Conference: IICSEEHawaii2021
Stream: Climate change

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Posted by James Alexander Gordon