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iBusiness, 2010, 2, 300-304
doi:10.4236/ib.2010.23038 Published Online September 2010 (http://www.SciRP.org/journal/ib)
Copyright © 2010 SciRes. iB
The Analysis on Environmental Effect of Logistics
Industry FDI*
Yang Wang
School of Management, Dalian Jiaotong University, Dalian, China.
Email: wangyang@djtu.edu.cn
Received April 10th, 2010; revised June 9th, 2010; accepted July 17th, 2010.
ABSTRACT
Whether it is positive or negative effect for FDI to the host environment, the theoretic problem exists in argument. The
paper analyzes influence factors, mechanism, environmental regulations and so on of FDI environmental effect, use
Spearman rank correlation coefficients to calculate, and believes that in the reality, the host country is the main factor
of the environmental effect, based on the stage of China’s economic development, environmental carrying capacity and
the advanced technologies and management concepts of TNC, to promote logistics FDI to play an positive environ-
mental effect.
Keywords: Logistics, FDI, Environmental Effect
1. Introduction
Environmental standards and industry regulations among
developed countries don’t differ much, so the environ-
mental effect has been ignored from the perspective of
developed countries as investment countries. However,
developing countries or underdeveloped countries are
generally lower than the requirements of developed
countries, so the environmental effect has been ignored
from the perspective of developing countries, which is
the reason of few research results about environment
effect. However, with the limit of environmental carrying
capacity of the host country, economic growth and in-
dustry upgrading, increased income to the environmental
requirement, the improved capacity of environment due
to increasing national wealth, environmental effect of
FDI has become an important subject of theoretic re-
search.
The problem about environmental effect of FDI is the
transfer of polluting industries, dividing into positive and
negative effect, if it is transferring the pollution industry,
which will be believed to produce negative effect, and if
it is not transferring the pollution industry, which will not
produce negative effect. Correspondingly, the basis for
the formation of environmental effect should be divided
into two areas: in open economy, environmental stan-
dards will influence the capital inflow among countries,
and pollution industries of high standard areas invest to
low standard areas, which produces transferred pollution.
“Pollution haven hypothesis” [1] well explains the source
of transferring the pollution industries among countries.
Pollution-intensive industries will transfer from the
countries with high environmental costs to the lower
ones, so the countries with low environmental standards
become “sanctuary” of world pollution and pollu-
tion-intensive industries. With global trade liberalization,
increased competition make less developed countries to
reduce environmental standards or relax regulations, so it
appears the phenomenon of “race to bottom”. The state
of race to bottom in environmental standards is called
“races effect” or “bottom race hypothesis” [2]. In the
literature of most foreign scholars, only a few demon-
strate the existence of hypothesis. The explanatory theory
of positive effect of FDI environment are only by Kevin
Grey and Duncan Brank [3], proposing “pollution halo
effect”, which shows that multinational corporations es-
tablish and promote TNCs, provide a good learning
chance for the host enterprises to adopt the similar man-
agement techniques, and further promote the domestic
enterprises to implement ISO 14001 environmental ma-
nagement system. Obviously, environmental problems
exists the fight of national interest. In the analysis of FDI
pollution-intensive industries and the reason of influenc-
ing environment, the scholar XiaYoufu [4] found that
*Science and technology projects in Liaoning Province, Number [2009
401011] contract number [2009040148-304].
The Analysis on Environmental Effect of Logistics Industry FDI
Copyright © 2010 SciRes. iB
301
international trade and investment theory don’t consider
the issue of environmental protection, some theories such
as comparative advantage in international trade, Vernon’
s product life cycle theory, the expansion of marginal
industry, provide a theoretical basis for developed coun-
tries to export pollution to developing countries. Li Huiru
[5] makes an initial systematic study on the environ-
mental effect of FDI, explore the mechanisms of the
formation of FDI environment and raise the to be solved
problems about the environmental effect of FDI: first, in
theory, the issue of FDI in positive and negative effect is
not significant, needing further theoretic and empirical
proof; second, the pathway and impact of environmental
effect of FDI are also not clear; third, how much the im-
pact of environmental regulations on environmental ef-
fect of FDI; fourth, how to protect environment and ef-
fectively coordinate FDI.
2. The Analysis on the Environmental Effect
of Logistics Industry FDI
2.1. The Influence Factors of the Environmental
Effect in Logistics Industry FDI
The impact of logistics industry on environment is main-
ly: occupying land due to transport and storage, such as
transportation access, site, ground and material storage
transportation and handling facilities; consuming fuel,
transport and storage equipment; generating wastes;
producing loss and waste due to distribution processing;
consuming material and processing waste due to reverse
logistics, etc.
2.2. The Information Mechanism of
Environmental Effect of Logistics Industry
FDI
1) The scale of logistics industry FDI to the mechanism
of environmental effect, When investment structure,
technology, the level of environmental regulations are
under the same conditions, the simply logistics FDI ex-
pands the scale of investment, which must increase the
use of environmental resources. In the same of invest-
ment structure and pollution intensity, when the scale of
investment expands, it will increase with the same pro-
portion of pollution output, so expanding the scale of
logistics FDI investment is not conductive to environ-
mental protection.
On the one hand, if the major role of logistics FDI is
capital information and economic growth in the host
country, the impact of FDI scale effect on environment is
that expand the scale of logistics FDI, economic scale,
increase the pressure of ecosystem and lead to vicious
exploitation and accelerating depletion. And the produc-
tion of logistics FDI is in China, the consumption also in
China, which will further increase the burden on the en-
vironment. Therefore, the cost of simply expanding FDI
investment is the emergence of environmental negative
effect.
On the other hand, increasing the scale of logistics FDI
is helpful to promote the economic growth, thus increase
income. Income growth will change people’s demand
structure, which leads to an increased demand of envi-
ronmental quality. Meanwhile, because of income
growth, the government is able to increase investment on
the environment, when reached a certain revenue, in the
early development stage, the increasing trend will decline
due to the pollution caused by logistics FDI.A further
increasing income will promote the industrial structure,
the upgrading and optimization of production technology,
leading to virtuous circle of two-way in environmental
improvement and economic growth, so when the scale of
logistics FDI reached a certain level and economic
growth reached a high level, it will produce the positive
environmental effect.
2) The structure of logistics industry FDI to the
mechanism of environmental effect, When the scale of
investment, product technology in the same condition,
people generally consider that the second industry occu-
pies the most environmental resources, followed by the
first industry, finally the third industry. Therefore, the
second, the first industry more reflect negative environ-
mental effect, and environmental effect of the third in-
dustry is relatively small, may have a positive effect. The
logistics industry is the third industrial area, due to its
production characteristics, and in the third industry, it is
the largest department of environmental resources occu-
pied, so the change of the investment structure in logis-
tics FDI will lead to different environmental effects.
Logistics FDI investment structure is the same with
the logistics industry of the host countries or lower than
it, and the phenomenon exists in the early stage of larger
space market, which will bring negative effect to the host
countries in the low level of market competition and the
larger cumulative negative effect, the more difficult to
govern. The cost of negative effect has been widespread
in attracting investment of developing countries. As the
logistics industry is derivative industry, in certain scale
of economic and certain logistics needs, low level of lo-
gistics market competition will become saturated, When
it can not be support by the extrinsic conditions, like
policy, etc, non-indigenous disadvantage of logistics FDI
will appear, and logistics FDI will tend to shrink or
withdraw from the host country. If the logistics FDI is in
a small proportion of China’s logistics market, it’s no
meaning to discuss logistics FDI.
When the organic composition of logistics FDI is high,
the proportion of using low consumption, low emissions,
The Analysis on Environmental Effect of Logistics Industry FDI
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302
clean energy, high technology and high efficient logistics
technology is high, and the investment structure is higher
than logistics industry structure of the host country, not
only it reduces the occupancy of environmental resources,
but promote the upgrading and optimization of logistics
industry structure in the host country due to competition.
As the spillover effect of technology and management
concepts promotes the improvement of logistics industry
in the host country, thus bring positive environmental
effect to the host country.
Logistics FDI is the type of market-seeking and im-
proving investment structure of the host country is mar-
ket competition, a voluntary act of FDI, in order to meet
the growing economy and increasing income require-
ments, it is necessary to increase the logistics supply, and
less occupancy of environment resource brings positive
effect to the host country.
3) The mechanism of environmental effect about the
technology of logistics industry FDI, environmental ef-
fect of technology, whether domestic or foreign invest-
ment, their positive environmental effects are greater
than negative environmental effects. Generally, the sci-
ence and technology of FDI exist in two aspects: on the
one hand, improve environment and reduce pollution as a
direct purpose of environmental science and technology,
with a direct positive effect. On the other hand, improve
economic benefit as purpose of science and technology,
and these technologies are helpful to save energy, form
an indirect effect of environment protection and im-
provement. The technology effect of logistics FDI refers
to with investment liberalization, the formation of logis-
tics specialization and the improvement of logistics
technology dissemination, which is helpful to achieve
lower element input to per unit of logistics output in a
broader range, improve the efficiency of element use,
and reduce per unit pollution output. The major purpose
of logistics FDI by the transformation of FDI and up-
grading the existing technology, improves the potential
innovation, and logistics FDI is just the main carrier.
Logistics cross-border investment lead to transfer ad-
vanced technology and accelerate the speed of transfer,
promoting cross-border spread of logistics environmental
technology. If the technology of FDI, which is less pol-
lutant and lower energy consumption, is higher than the
environmental standards of the host country, it indicates
that these can improve environment and the use effi-
ciency of resources, producing positive effect.
But logistics FDI reduces environmental standards to
use low technology, or the technology can’t protect en-
vironment, and produce negative technology effect in the
host country. Mainly in the early attracting foreign in-
vestment stage of loose environmental regulations, logis-
tics FDI produce the motive of transferring high-pollu-
tion equipments and using double environmental stan-
dards and cheaper technology.
The environmental effect of FDI mainly exists in two
attitudes: one point is that as logistics FDI expands the
scale of economy, produces greater pressure on envi-
ronment, transfers cross-border pollution and hazardous
substances, and exacerbates the environmental deteriora-
tion of the host country and world. Another point is that
by more reasonable and effective allocation of FDI, so it
may widespread ecological technology to help improve
and protect environment. In the judgment of investment
scale effect, generally, the investment scale will increase
environmental degradation. In judgment of investment
structure, using clean production technology will im-
prove environment. The structural effect and technology
effect are generally larger than the scale effect. So logis-
tics FDI will expand economic structure, increase income,
upgrade the industrial structure, and enhance productivity.
High productivity can promote economic development,
expand the economic scale, strengthen the environmental
protection, spread eco-technology, and make productivity
reach a new level, finally increase internal ability of en-
vironmental cost, promoting sustainable development.
The investment scale, investment structure and technol-
ogy level will act on environment and form interacting
mechanism, and ecological and advanced technology is
the fundamental way to solve environmental problems.
The environmental effect of logistics FDI relates to the
economic development, environmental regulations, and
environmental element endowments and so on in the host
country.
2.3. The Impact of Environmental Regulation on
the Environmental Effect of Logistics FDI
Industry regulation directly influences the industry, and
the environmental regulations of the host country have a
direct impact on the environmental effect of FDI, and the
relationship between the two judgments manifests in two
aspects: on the one hand, the low level of environmental
regulation in the host country will lead to produce nega-
tive effect of FDI environment, such as the establishment
of “pollution haven hypothesis”; on the other hand, high
level of environmental regulations will lead to produce
positive effect, such as not the existence of “pollution
haven hypothesis”. The majority studies on the casual
relationship between environmental regulations and FDI
have confirmed the impact of FDI on increasing envi-
ronmental pollution in China. The scholars Xing, olslad
and so on [6] studied on FDI inflows and found that
loose regulations of the host country attract pollu-
tion-intensive FDI of developed countries, and have little
impact on less pollution industry. Logistics industry is
the minor pollution of the third industry, so the higher
The Analysis on Environmental Effect of Logistics Industry FDI
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303
regulations of logistics FDI have little impact on the use
of foreign investment. Judith and Mary [7] by the loca-
tion choice of FDI in China, the analysis showed that the
different sources of FDI are inclined to the regions with
low cost. Lower environmental taxes only attract FDI,
from Hong Kong, Macao and Taiwan and other Asian
regions, to invest in pollution-intensive industries. For
developing countries, FDI of developed countries don’t
usually show the preferences on the strict control of pol-
lution, from the FDI of OECD countries, whether to in-
vest in pollution-intensive industries, it isn’t attracted by
lower environmental taxes. Porter [8] believed that the
pressure of environmental control like the pressure of
market competition, encourage clean production or the
innovation of clean products, and these innovations can
offset some or all of the regulation costs, then logistics
FDI can improve pollution control technology, to pro-
duce positive environmental effect, achieving a clear
advantage in logistics market competition. Yang Tao [9]
tested the impact of environmental regulations on FDI
inflows, and believed that the strict regulations influence
on attracting FDI, but not the main factor. For discussing
the long-term change relationship between FDI and en-
vironmental regulations, Wu Yuming [10] suggested that
the strict regulations will have a real impact on the lag
phase of FDI. Compared with other factors, the strict
regulation will have a little impact on FDI, and will not
affect foreign investment recently. China logistics FDI
mainly comes from the multinational corporations of
developed countries, of which the level of environmental
protection and standards are higher than that of domes-
tic-funded enterprises, and the improvement of environ-
mental regulations is useful to develop the market com-
petition of logistics FDI.
2.4. The Measurement of FDI Environmental
Effect
In the process of attracting investment, because the par-
ticularity of four municipalities and incomplete data in
Tibet, the paper eliminates these five provinces, and use
Spearman rank correlation coefficients to do the rank
correlation analysis on GDP, FDI, the amount of “three
wastes” emissions, the amount of wastewater emissions,
the amount of sulfur dioxide emissions and the amount of
solid waste in East, West and central regions of 26 prov-
inces [11]. The formula is:
1
6
12
1
2
nn
d
n
i
i
(1)
Formula 1: n is that the observed values of two vari-
ables arrange from big to small, or small to big, and
given 1-n grades; d is the difference between the ob-
served values of two variables. Spearman rank correla-
tion coefficients range between –1 and +1, and the
greater their absolute values, the greater relevance of two
variables; the smaller their absolute values, the smaller
relevance of two variables.
Use SPSS to calculate Spearman rank correlation co-
efficients of GDP, FDI, the amount of “three wastes”
emissions, the amount of wastewater emissions, the
amount of sulfur dioxide emissions and the amount of
solid waste in East, West and central regions of 26 prov-
inces. By analysis, attracting FDI of China distributes in
many pollution industries, and east region is much more
than in west and central regions. Increasing FDI and ex-
panding production will inevitably affect the environ-
ment, giving more pressure on the environment in the
region, which reflect in statistical data that is relatively
more the amount of “three wastes” emissions. By Spear-
man correlation coefficients, FDI and “three wastes”
emissions have a high correlation, and the correlation
coefficients are greater than 0.6.
From the distribution of FDI region, eastern, central
and western regions decrease in order, “three wastes”
emissions also decrease in order, the same with negative
environmental effect. The regional GDP, FDI and the
amount of “three wastes” emissions have a high correla-
tion, and a direct proportion relationship with negative
environmental effect.
3. Conclusions
Logistics FDI brings environmental effect to the host
country, and the absolute amount is negative effect, when
logistics FDI meets the increasing economic output of
the host country, it must increase the environmental
consumption of the host country. However, in the rela-
tive amount, logistics FDI may be a positive effect, this
is because FDI owns advanced logistics technology and
management, when operating the same amount of logis-
tics business, the consumption of environmental resource
is lower than the host country. Therefore, logistics FDI of
developed countries put into developing countries and
underdeveloped countries, which has a positive meaning
in the environmental effect.
China’s logistics industry introduce FDI in the early
stage from mainly developing countries and regions in
Asia, which should change from mainly Europe, the
United States, Japan, South Korea and other developed
countries to introduce FDI. Use advanced logistics tech-
nology in the world, promote high-speed national eco-
nomic development with the smaller cost of environ-
mental costs, and ensure logistics FDI in China’s sus-
tainable development by environmental regulations.
Introduce advanced logistics technology and manage-
The Analysis on Environmental Effect of Logistics Industry FDI
Copyright © 2010 SciRes. iB
304
ment philosophy of developed countries, promote the
development of green logistics, making efficient forward
logistics and smooth reverse logistics, and form the posi-
tive environmental effect of the whole logistics.
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