The purpose of this paper is to investigate the impact of foreign direct investment (FDI) on sustainable development (SD) in China by using a regression model. Based on a panel date ranging from 1996 to 2016, this study makes an assessment of how development is sustained by means of an impose response function model. The findings revealed that, first, FDI has an insignificant influence on environmental quality in the long run but aids in financing physical capital deficits. Second, there exists the presence of the pollution halo hypothesis. In addition, in the short-term, pollution variables (sulfur dioxide and smoke and dust) cause significant variances on the amount of FDI inflows into China. However, they significantly lose their variation effect to FDI inflows in the long run due to the utilization of advanced technologies. Lastly, it is recommended that stricter environmental policies and strategies are implemented to curtail foreign investors from defaulting.
Keywords: Economic development; Environmental quality; Foreign direct investment; Sustainable development.