Natural resources extraction and industrial expansion: Natural resources a curse or blessing for the industrial sector of China?

Abstract

Several studies in the previous literature evaluated the nexus of natural resources and economic growth. However, the literature on industrial expansion is generally missing, specifically in China's context. Henceforth, this study evaluates the nexus of natural resource rents and industrial expansion in China from 1985 to 2021. The study accounts for the globalization index and economic growth as control variables. Several time series methods are included, including ADF-GLS for unit root testing and the test specifies that all variables are non-stationary at level I (0). For the empirical findings, ARDL techniques are documented, which reveal that natural resources have an asymmetric effect on industrial expansion. Mineral and forest rents increase industrial expansion in China, while coal rents significantly decrease industrial expansion. Globalization index and economic growth highly improve industrial expansion in China despite taking several breaks in economic growth. The robustness check analysis results are similar to the main estimates obtained via ARDL; However, the two important components of natural resources rents, including mineral rents and forest rents, were found insignificant through both parametric tests, which indicate resource curse in China with industrial expansion. Several policy implications have been derived from the estimates, indicating that globalization and economic growth must be encouraged further to enhance natural resource rents and industrial expansion.