Policy dividend or "policy trap"? Environmental welfare of establishing free trade zone in China.

Taking the establishment of China's Guangdong free trade zone (GFTZ) as an example and using data from 180 prefecture-level cities in China from 2008 to 2018, this study evaluates the effect of establishing FTZ on environmental welfare for the first time and investigates the underlying mechanism. The results show that, from the perspective of environmental improvement, the establishment of the GFTZ is forming a "policy trap". For every 100 million yuan increase in the GDP, discharged wastewater and waste gas will increase by 1.746 million tons and 28.016 tons, respectively. Introducing advanced technology and improving financial efficiency can reduce discharged wastewater and waste gas per unit of GDP, thus improving environmental welfare. However, the establishment of the GFTZ has not significantly improved technology introduction. More importantly, industrial agglomeration caused by the establishment of the GFTZ has not improved regional environmental welfare. These findings explain why the establishment of the GFTZ is becoming an environmental "policy trap". The above conclusions can inspire China and other developing countries to address their weak technical foundation, lagging financial development and low-end industry agglomeration to balance economic development and environmental protection with opening to the outside world.