Kiel Research Project on Global Producers in China and their Impact on Environment

Global shocks such as the COVID-19 pandemic and the war in Ukraine have led to supply shortages of various critical products, heightening concerns about the reliability of global value chains (GVCs) and the risks of excessive economic dependence on individual, often authoritarian, countries like China. These concerns have been further amplified by escalating tensions in trade and high-tech sectors between the West and China. As a result, foreign direct investments (FDIs) in China have come under increasing scrutiny from the West. Some experts advise for a partial or even complete withdrawal from China.

Another, but yet unconnected, discussion is on the environmental impact that production reshoring to countries such as China has in terms of global emissions and pollution. The question whether the economic benefit of FDI comes at an environment cost remains insufficiently addressed in existing research. This is especially worrisome since China is one of the most attractive host countries for FDI worldwide, but also the one with the most Carbon Dioxide (CO₂) emissions.

To investigate the link between FDI and environmental costs for domestic and foreign international firms producing their goods in China, several experts from the Kiel Centre for Globalization (KCG) and the Kiel Institute for the World Economy (IfW) are working on the project “Global Producers in China: Empirical Evidence on FDI, Product-Mix and Emissions”, funded by the Fritz Thyssen Foundation. For this, Prof. Holger Görg, Ph.D. (KCG, IfW & Kiel University), Prof. Aoife Hanley, Ph.D. (KCG, IfW & Kiel University), Dr. Wan-Hsin Liu (KCG & IfW), Dr. Finn Ole Semrau (KCG & IfW), Lars Hecker (KCG & IfW) as well as Limin Du (Zhejiang University) and Zheng Wang (University of Dundee) analyze the development of pollution in China over time, the effect of FDI on firm’s environmental footprint and production and abatement technologies, and possible changes in the product mix.

More information and selected key findings can be found on the project website.