Cross-border capital flows, government quality, and China's low-carbon productivity

As "Comprehensive Opening-Up" and "Going Out" are fundamental pillars of China's economic development, the environmental consequences of cross-border capital inflows have spurred considerable academic debate. This study attempts to explore the impact of heterogeneous cross-border capital on low-carbon total factor productivity enhancement in China, considering government quality as a moderating mechanism, by employing a panel data of China's 30 provinces from 2003 to 2021. The results of fixed-effect model show that IFDI quality and OFDI scale are effective contributors to low-carbon productivity growth, however IFDI scale generates an inhibiting effect. Moreover, results drawn from the panel threshold model confirm that government quality acts as significant but fundamentally different moderating mechanisms for the productivity-effects of IFDI and OFDI. The productivity effect of IFDI quality is highly sensitive to the rule of law environment and intellectual property rights protection, while the reduction of regional market segmentation needs to be maintained within an optimal intensity range. Otherwise, the nexus of OFDI-productivity is more comprehensively affected by the governance capacity and efficiency of local governments. These findings provide a valuable policy foundation for China's high-quality opening-up and its low-carbon economic transition.