Abstract:    In the new era, accelerating industrial upgrading has become a key measure for China to achieve high-quality economic development. It is generally believed that, whether it is cross-border capital inflow or outflow, it is often accompanied by overall transfer and reallocation of a large number of technologies, human capital and management experience, so that the role of two-way FDI in driving industrial upgrading cannot be ignored. In particular, with the continuous deepening of the concept of green development in China, the government has continuously raised the "quality threshold" of international capital flows, which invisibly promotes environmental regulation to become an important tool for regulating international capital flows. Unfortunately, few academic studies have paid attention to this issue. Under such circumstances, scientific analysis of whether environmental regulation can become a "regulator" for two-way FDI-driven industrial upgrading in the new era undoubtedly has important theoretical and practical significance.
    Literature analysis found that there are still some shortcomings among existing research: Firstly, the dynamic evolution law and phase characteristics of the role of two-way FDI in the process of industrial upgrading are ignored; Secondly, there is no literature systematically explaining whether environmental regulation can become a "regulator" for two-way FDI to drive domestic industrial upgrading. The main innovation of this paper is that it effectively identifies the effects of environmental regulation on international capital inflows, outflows and domestic industries, as well as the dynamic and differentiated adjustment characteristics in the process of upgrading the internal correlation, and then based on the new perspective of two-way regulation of environmental regulation, it provides a feasible solution for effectively realizing the coordinated development of international capital investment and domestic industrial upgrading.
    Using panel data from 30 provincial-level regions in China from 2004 to 2019, and threshold measurement technology, we empirically examined whether environmental regulations can effectively force and dynamically correct the industrial upgrading effect of two-way FDI. The results show that: The impact of OFDI and IFDI on industrial upgrading has the characteristics of "U" and negative "U" evolution respectively; Environmental regulation can completely reverse the potential adverse impact of two-way FDI on industrial upgrading, and can completely become a two-way "regulator" for international capital to effectively drive industrial upgrading. The current intensity of environmental regulations is most conducive to forcing OFDI′s reverse industrial upgrading, but the correction effect on IFDI-driven industrial upgrading is generally negative; Although the current environmental regulations affect OFDI in various regions, the reverse industrial upgrading effect of China has produced various degrees of positive adjustment effects, but it has not effectively forced the eastern and western regions to achieve the coordinated development of IFDI and industrial upgrading. 〖JP〗
This paper has the following policy implications: Firstly, the government should not only exert the positive impact of OFDI on industrial upgrading, but also avoid the adverse impact of IFDI on industrial upgrading as much as possible. Maintaining a moderate or high intensity OFDI strategy is conducive to industrial upgrading, while the IFDI strategy has relatively little room for policy adjustment. It should be ensured that the IFDI intensity is kept at a relatively high level within a certain limit; Secondly, the government should implement a heterogeneous environmental regulation strategy, so as to keep the intensity of environmental regulation in the process of "going out" at a moderate level. In addition, it is necessary to continue to enhance the intensity of environmental regulation in the process of "bringing in", forcing IFDI companies to continuously improve their technological content in China; Thirdly, the eastern region should implement a strict and heterogeneous environmental regulation strategy of "bringing in" rather than "going out", the central region should maintain a moderate environmental regulation strategy in the process of two-way opening, and the western region should take lower environmental regulation strategies in the process of "going out", while moderate environmental regulation means should be implemented in the "bringing in" process.

Key words: environmental regulation, foreign direct investment (FDI), outward foreign direct investment (OFDI), industrial upgrading, dynamic adjustment