Impact of the green credit policy on external financing, economic growth and energy consumption of the manufacturing industry

Abstract

China attempts to achieve energy conservation, emission reduction and environmental protection through the implementation of the green credit policy, but its implementation impact is still controversial. An important content of the green credit policy is to require banking and financial institutions to tighten the credit exposure of industries of ‘high pollution and high energy consumption’ and industries with overcapacity, so as to use economic leverage to curb their blind expansion and reduce energy consumption by controlling external financing. This paper examined the impact and the lingering effects of the green credit policy on external financing, economic growth and energy consumption in the manufacturing industry, which was most influenced by the green credit policy, from 2003 to 2016 by using the DID method. Furthermore, this paper estimated the dynamic endogenous relationships among external financing, economic growth and energy consumption with two-step system GMM model to investigate the influential path of the green credit policy. The results showed that: the green credit policy had a significant negative impact on the external financing of manufacturing industry, but its negative impact on the economic growth and energy consumption of manufacturing industry was not statistically significant, and the effect of the green credit policy had a dynamic feature of weakening with time. Additionally, in the manufacturing industry, there was a bilateral causal relationship between the energy consumption and economic growth of the control group industry and the processing group industry. There was a bilateral causal relationship between the economic growth and external financing of the control group industries in the manufacturing industry. There was a unilateral causal relationship between the economic growth and external financing of the processing group industries in the manufacturing industry, while the external causality existed between the control group industries and the processing group industries in the manufacturing industry. The causal relationship between the financing and energy consumption was not statistically significant. At present, the transmission path of the green credit policy is that the green credit policy controls external financing, then affects economic growth and ultimately inhibits energy consumption, but the effectiveness of the path is not statistically significant. The conclusion of this paper provides policy reference and scientific basis for the adjustment and improvement of green credit.