Nonlinear impact of the coordination of IFDI and OFDI on green total factor productivity in the context of “Dual Circulation”

Abstract Economic growth and environmental pollution have become the bases of geopolitical competition due to the multiple constraints of growth in energy consumption and environmental protection in recent decades. Whether the coordinated development of inward foreign direct investment (IFDI) and outward foreign direct investment (OFDI) promote economic growth while reducing environmental pollution and realizing high-quality development affects the overall socialist modernization under China’s “Dual Circulation” policy. Using China’s provincial panel data from 2005 to 2020, this paper first measured green total factor productivity (GTFP) and the coordinated development index (CDIFDI) of IFDI and OFDI via the slacks-based measure-global Malmquist–Luenberger (SBM-GML) model and the capacity coupling model. A panel threshold model with interactive effects (PTIFEs) was then applied to explore the nonlinear impact of the CDIFDI on China’s GTFP. Finally, a regional heterogeneity analysis was conducted for China’s eastern, central and western regions of China. Results show that (1) GTFP in China kept rising with small fluctuations during the sample period, with the increasing range of GTFP decreasing from east to west. (2) CDIFDI had a significant “U”-shaped threshold effect on GTFP, and the main threshold variables were the industrial structure and the level of economic development. (3) CDIFDI played a positive role in promoting GTFP growth in the eastern region, while the effects of CDIFDI on GTFP in the central and western regions were not significant. Policy-makers and enterprises should comprehensively consider promoting regional industrial upgrading and economic growth to achieve a greater positive impact of CDIFDI on GTFP. Scientifically measuring GTFP and exploring the nonlinear impact of the CDIFDI on GTFP and regional heterogeneity provide helpful references for policy-makers to coordinate the high-quality development of regional economies.