6 - Vertical specialization and lowering environmental damage: Comparing impacts of conventional trade and processing trade patterns on energy consumption in China

Abstract

This chapter examines the effects of vertical specialization trade on the environment in China. It draws on China Statistical Yearbook data for the period from 1981 to 2012 to estimate the effects on energy consumption through conventional trade and processing trade. There are four major findings. First, at the aggregate level, the implied total energy consumption (TEC) from imports and exports by conventional trade exceeded that from processing trade in China. Second, at the industry level, the implied natural gas consumption (NEC) from imports and exports by processing trade decreased in China, and that from conventional trade increased in China. Third, at the industry level, coal consumption (CEC) from exports by processing trade decreased in China, and that from exports by conventional trade increased in China. Fourth, at the industry level, petroleum consumption (PEC) from imports by conventional trade exceeded that from processing trade. Finally, hydro power, nuclear power, and other power consumption (HEC) from imports and exports by conventional trade exceeded that from processing trade in China. An implication of the overall results is that in cases when China’s Customs Statistics (CCS) distinguishes between imports and exports linked to conventional trade and processing trade, lowering environmental damage may be subject to potential effects—positive or negative—of vertical specialization trade during the transition to inclusive growth in China.