Abstract
A current and universal challenge, particularly in developing nations, is the establishment of effective environmental regulation policies that protect the ecological environment without adversely affecting the international competitiveness of the domestic manufacturing industry. To deal with this dilemma, this study investigates the export competitiveness of China’s manufacturing industry from the viewpoint of export value added. The Porter hypothesis is applied for an empirical investigation of the effect of environmental regulation on export competitiveness and to determine the presence of intra-industry heterogeneity. Furthermore, this study seeks to understand the mechanisms through which environmental regulation affects export competitiveness by exploring the two main approaches to technological innovation. The findings reveal that environmental regulation has a promotion effect of approximately 2% on the export competitiveness of China’s manufacturing industry; however, this effect is non-linear and displays a “U-shaped” tendency, indicating that certain prerequisites must be fulfilled to validate the Porter hypothesis. In addition, the effect of environmental regulation displays significant intra-industry heterogeneity, which is evident primarily in heavily polluting sub-industries and to a lesser extent in moderately polluting sub-industries but insignificant in lightly polluting sub-industries. Environmental regulation also differs significantly in the mechanisms through which it affects different approaches to technological innovation. Independent research and development is affected by environmental regulation through the compliance cost effect, which limits export competitiveness, while technology introduction is affected by the innovation offset effect, which favors export competitiveness. These findings offer political implications for the sustainable development of the ecological environment and foreign trade.
Highlights
Amid economic integration and market globalization, Chinese products have rapidly penetrated into overseas markets due to their inherent advantages
The econometric model is as follows: ln VRCA jt = α0 + α1 ln Environmental Regulations (ER) jt + α22 + ψX + δ j + ε jt where ln denotes the natural logarithm applied to a variable to produce more stationary data; j represents the manufacturing industry; t stands for the year; VRCA is revealed comparative advantage (RCA) measured by export value added to reflect the export competitiveness of the manufacturing industry; ER represents environmental regulation; δ denotes industry fixed effect, which reflects the intra-industrial differences in characteristics; ε is the random error term; and X denotes the five control variables that may influence export competitiveness: technological innovation, capital intensity (Capital), human capital (Human), size of the enterprise (Size) and foreign direct investment (FDI)
The Porter hypothesis is revisited for an empirical investigation of the effects of environmental regulation on export competitiveness and to determine the presence of intra-industry heterogeneity
Summary
Amid economic integration and market globalization, Chinese products have rapidly penetrated into overseas markets due to their inherent advantages. In 2015, China’s commodity exports contributed to nearly 14% of the international market and totaled US$ 2270 billion, 94% of which accounted for manufactured goods. “Made in China” has become one of the most recognized trademarks in the international market. Several concerns have arisen from China’s emergence as a manufacturing power. Poor air quality in many Chinese regions illustrates the immense environmental cost of China’s economic growth. Under a trade-development model centered around low-quality and low-price products, the “Made in China” model results in low-end lock-in in
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