Assessing the relationship between foreign direct investment and low carbon development in Chinese manufacturing industry

Although research on the impact of foreign direct investment and low-carbon development in target nations has received attention, studies exploring the influence mechanisms of foreign direct investment on low-carbon development from the perspectives of environmental regulation and human capital, as well as the linear and especially nonlinear relationships between these variables, remain scarce. Rooted in the “pollution paradise” hypothesis, the “pollution halo” hypothesis, and the Porter hypothesis, this paper aims to verify the positive impact of foreign direct investment on low-carbon development in China’s manufacturing sector and the positive moderating roles of environmental regulation and human capital in this process, while further analyzing the threshold characteristics of these moderating effects. Based on panel data from 30 provinces in China from 2003 to 2022 and using fixed effects and threshold effects models, this study finds that: First, foreign direct investment promotes low-carbon development in China’s manufacturing sector, and so can environmental regulation and human capital. Second, as the intensity of environmental regulation intensifies, the promoting effect of foreign direct investment on low-carbon development in China’s manufacturing sector diminishes. Third, foreign direct investment significantly promotes low-carbon development in China’s manufacturing sector only when the level of human capital reaches a certain threshold. In the context of global consensus on low-carbon development, this study provides valuable insights for policymakers and stakeholders in developing countries seeking to balance economic growth with low-carbon development.