How Does Foreign Capital Impact Urban Green Development? Evidence from Central China
Authors: Peixu Wang , Talib Zunirah Mohd , Keat Ooi Boon 
Published: May 2024

Background: Foreign capital, a significant component of the contemporary export-oriented economy, helps to solve ecological and environmental issues and encourages the green transformation of urban development techniques. This study develops an assessment framework for urban green development using panel data from 80 cities in Central China between 2007 and 2022. Simultaneously, the impact of foreign capital on urban green development was tested through the mechanism of green technological innovation using the panel mediating effect model, and the impact of economic development level on the impact of foreign capital on the same was tested using the threshold effect model. The primary research findings are as follows: (1) Foreign capital has greatly enhanced urban green development in Central China; (2) Green technology innovation acts as a major mediating variable in the process by which foreign capital influences urban green development; (3) Economic development has a single threshold effect on foreign capital influencing urban green development. This article suggests that the government focus more on the prudent use of foreign capital in light of the findings above. The study's findings offer an empirical foundation for more effectively encouraging urban green development as well as some theoretical direction for the long-term growth of human society in underdeveloped nations or areas.

Objective: The objective of this study is to explore the key factors affecting urban green development in Central China, including the direct impact of foreign capital, the mediating effect of green technology innovation and the threshold effect of economic development, with the aim of improving urban green development in Central China.

Theoretical Framework: This study mainly refers to Sustainable Development Theory and Schumpeterian Innovation Theory. Because urban green development belongs to the category of sustainable development, and the mediating analysis in this article is consistent with Schumpeterian Innovation Theory.

Method: The entropy method is used to measure the degree of urban green development. Baseline regression is used to analyze the direct impact of foreign capital on urban green development. The mediating model is used to analyze the mediating role of green technology innovation in the impact of foreign capital on urban green development. The threshold model is used to analyze the threshold effect of economic development on foreign capital in affecting urban green development.

Results and Discussion: The results confirmed the hypothesis. First, foreign capital has a positive impact on urban green development. Second, green technology innovation plays a mediating role in the process of foreign capital affecting urban green development. Third, economic development plays a single threshold effect in the process of green technology innovation affecting urban green development.However, this study still has certain limitations. Because there are certain differences between official statistics and reality, and the indicators selected in this article are limited, they cannot fully reflect the actual results.

Research Implications: The practical and theoretical implications of this research are discussed, providing new ideas for urban green development in Central China from the perspective of foreign capital. And the role of green technology innovation and economic development cannot be ignored. This is not only in line with the world theme of green and sustainable development, but also conducive to accelerating the internationalization process of Central China. And this research also provides theoretical support for green development in developing countries or regions.

Originality/Value: This study contributes to the literature by being based on official data from the National Bureau of Statistics of China and using a series of recognized empirical methods to study Central China's urban green development and key influencing factors. The value of this article is that it not only enriches the research on urban green development in Central China. It also provides a reference for green development and international development in other developing regions in China and other developing countries or regions around the world.