Driving force for China’s economic development under Industry 4.0 and circular economy: Technological innovation or structural change?

Abstract

The integration of the circular economy (CE), a model promoting the cyclical use of resources, and Industry 4.0, an intelligent-based approach to manufacturing, is expected to achieve sustainability. Finding the most suitable path for technological progress and structural change to promote economic growth is the key to adopting Industry 4.0 technologies and successfully transforming to a CE, and thus, key to China achieving sustainable development quickly. This study identifies the joint effects of energy- and environment-biased technological progress and multi-dimensional industrial structural change on economic growth, and empirically verifies the specific effects within China. Our results are as follows. First, pollution abatement technological progress, backstop technological progress and autogenous structural ecologicalization are the main drivers of sustainable economic growth. Second, innovation policies have a positive impact on national economic growth by promoting pollution abatement technological progress. Finally, in sub-regions’ regression, backstop and environment technology, and structural ecologicalization promote eastern China’s economy, while policies drive environment technological progress and structural ecologicalization to stimulate economic growth in central and western China. Our results imply that policymakers should take into consideration the readiness levels of each region regarding the adoption of Industry 4.0 and circular economy, and that the government should consider and ensure the participation of all stakeholders, including firms.