Green or Grey? The Carbon Emission Impacts of China’s Outward Foreign Direct Investment: Mechanism and Heterogeneity Evidence

To empirically verify whether China’s “Going-Out” strategy influences global carbon dioxide (CO2) emissions, this study investigates the effect of China’s outward foreign direct investment (OFDI) on recipient countries’ CO2 emissions, using a panel dataset of 68 countries over the period 2003–2021. In addition, we separately test the three major effects (i.e., scale, technical, and structure effects) of China’s OFDI on recipient countries’ CO2 emissions. Considering the importance of the “Belt and Road Initiative” (B&RI) for China’s “Going-Out” strategy, the global panel is divided into two subpanels (i.e., B&RI and non- B&RI countries) for empirical analysis. The results show that the total effect of China’s OFDI on CO2 emissions is positive for the global panel and B&RI countries but negative for the non-B&RI countries. Although China’s OFDI increases recipient countries’ CO2 emissions by improving the economic scale (scale effect) and inhibiting the industrial upgrading (structure effect), the technical effect of China’s OFDI alleviates the greenhouse effect. Based on the above findings, several targeted policy suggestions for mitigating recipient countries’ CO2 emissions and promoting growth in China’s OFDI are provided.