The book Foreign Firms, Investment, and Environmental Regulation in the People's Republic of China by Phillip Stalley makes a critical contribution to our understanding of the impact of foreign firms on China's environmental regulation. Industrial pollution is a severe problem in China today, causing serious health and environmental concerns. According to estimates, industrial pollution accounts for 4 to 5 per cent of the nation's annual GDP in terms of clean-up costs, health care costs and lost wages. Hence, attention to this problem is essential for government and business. Stalley's book stays on a more generic level by engaging in the wider debate about the implications of foreign capital (or “mobile capital” as Stalley names it) for environmental regulation. More specifically he poses the questions: how do multi- and trans-national corporations (MNCs and TNCs) influence environmental regulation in China? Does foreign firm investment have a so-called “regulatory chill effect,” which implies that authorities lower standards or weaken implementation to attract foreign capital?

Stalley examines the particularities of China's regulatory framework, while taking on the wider discussion of the impact of global capital flows on the environment. The author draws on his own research results and a broad range of secondary data. He includes a variety of cases and examples comprising both domestic and foreign firms, and the interaction between these. The empirical results are presented, fairly late in the book, after chapter four.

The structure and scope of the book is comprehensive. Stalley introduces the various theories, paradigms and opposing stances regarding the implications of foreign firm investments on host countries' environmental regulatory system. Rather than solely focusing on the lowering of standards in the “race-to-the-bottom” debate, the author posits that one should look at the actual implementation and stringency in the execution of environmental laws to identify whether there is a regulatory chill effect. Insufficient and weak environmental enforcement at the local level may frustrate the ambitions of national government organs to strengthen oversight at the firm level. Stalley rightly devotes substantial attention to this issue in his book. The second chapter provides an overview of the broad range of environmental laws and regulations that have been issued in China since the late 1970s. For readers unfamiliar with China's environmental institutions it provides the necessary background for the remainder of the book. The specific environmental policies geared towards foreign firms are discussed in chapter three. In the beginning of the 1980s the environment gradually gained prominence in national law-making when the government became aware of the potential risks of uncontrolled foreign investment flows.

In the following chapter, Stalley demonstrates the stringency of Chinese environmental law in a comparative international perspective. He does so through the results of a survey by the World Economic Forum (WEF), which deals with perceptions of business executives about the stringency of environmental regulation in their country. The author raises questions about this survey, but nonetheless displays the results extensively. One would have expected Stalley at least to review more critically the survey results, or to contrast these with the findings of comparable surveys based on different methods, or perhaps to make less extensive use of these results.

Chapter four describes the actual implementation of environmental law at the grassroots. By scrutinising governmental actors and industry's performance, the author analyses in detail how the interaction between the two dimensions unfold on the ground. The weak enforcement of environmental regulation is exemplified by the uncontrolled development of chemical parks in China – in which foreign firms, in fact, do not play a primary role. Stalley describes and reviews a great number of firm cases, which at times can be a bit confounding. The reader is looking for a set of indicators or parameters that set out the overarching framework that links the different cases. However, the cases do add to our understanding of the (mal)functioning of environmental enforcement and the manoeuvring space that firms have. They are good illustrations that explain how local development priorities conflict with national policies. This is further illustrated in chapter five with the author's empirical results. Certain authorities lessen their environmental oversight, whilst other regions – seemingly being equally attractive to foreign firms for other reasons – have relatively stringent implementation of environmental laws. Stalley rightly notes that other regional characteristics, such as GRP and an educated workforce, may be equally important in selecting an investment location. The author makes a valid point by postulating that it is difficult to assess and assert whether poor environmental implementation indeed attracts FDI, and whether this has a downward spiralling effect on jurisdictions to weaken environmental enforcement. Stalley conducted around 30 interviews with representatives from 16 multinational corporations (MNCs) operating in the chemical sector. In sum, MNCs often go “beyond compliance,” but Stalley suggests that their motive is primarily a matter of corporate image. With an in-depth analysis of Shell's involvement in a PetroChina project, the author elucidates how foreign firms can influence domestic firms' operations.

Chapter six examines the interrelationship between the firms' country of origin and their corporate behaviour. The underlying hypothesis here is that lower “home setting standards” would correlate with sub-standard environmental performance abroad. This is explained through a case study of an Indonesian firm operating in Yunnan province. Firms from Hong Kong and Macau are allegedly among the worst performers in China, but the author points to the thesis that these could in fact be Chinese companies that have registered in Hong Kong to benefit from privileges for foreign investments. Concerning the occurrence of a “regulatory chill” effect, Stalley is cautious, yet fairly positive. However, he sees indications of such a negative effect from investments of trans-national companies from Southeast Asia. In the final part of the book, the author touches on a related critical issue surrounded by much controversy and prejudice: the global expansion of Chinese firms. Do Chinese firms compromise on social and environmental standards, or are Chinese global enterprises today on an equal green footing with other foreign firms? Are there potential spill-overs to China's domestic industries? These questions, along with those posed earlier in the book, raise issues that warrant in-depth analysis, and for which Stalley's book has put forward a solid future research agenda.