The Impact of Reverse Technology Spillovers from China’s OFDI on Carbon Emission Intensity

Abstract This study examines the impact of reverse technology spillovers (RTS) from China’s outward foreign direct investment on carbon emission intensity in the country. Drawing on New Structural Economics, we argue that the effectiveness of RTS in promoting energy efficiency and clean technologies depends on the strength of the home country’s absorptive capacity (AC). Furthermore, the mediating role of AC is influenced by the degree of economic alignment between the home country and its OFDI destination countries, insofar as foreign technologies that are better suited to the domestic productive capabilities can be more easily exploited by domestic producers. Using provincial data from 2004 to 2022, our multiple mediation effect model reveals a significant and negative indirect effect of RTS on carbon intensity through absorptive capacity. Additionally, we find that Chinese OFDI directed towards host countries that are more economically aligned with China’s development status enhances the effectiveness of absorptive capacity in mediating the impact of RTS on reducing carbon intensity. These findings suggest that policies aimed at improving China’s absorptive capacity, coupled with investments targeted to countries aligned with its evolving capabilities, are effective strategies to maximize the potential for China’s global integration to support sustainable development.