How productive capacities influence trade-adjusted resources consumption in China: Testing resource-based EKC

Abstract

A series of economic parameters may influence material footprints (resource consumption). The efficacy of a country's infrastructure for generating commodities is one of the most essential of these elements. This study contributes to determining the influence of productive capacities on trade-adjusted resource consumption in China. Using a bootstrapping autoregressive distributed lag (BARDL) model, it examines the co-integration relationship between China's material footprints (MF), productive capacity index (PCI), and economic growth from Q1-2000 to Q4-2018. The results exhibit that if PCI rises by one percent, long-term resource consumption falls by 0.298 percent while economic growth rises by 0.316 percent. In the short run, a one percent improvement in production efficiency has a comparable effect on economic growth (0.175%) and resource conservation (0.123%). Long-term resource consumption grew as per capita income rises. Moreover, the results do not support the resource-based Environmental Kuznets Curve hypothesis. Long-term estimates suggest that productive capacities have a significant impact on lowering material footprints, adding validity to the notion. The findings show stronger impacts in the long run than in the short run, consistent with the long-run transmission of economic and environmental implications, with significant convergence towards long-run equilibrium. This result implies that efficient resource management can be obtained by improving productive capacities.