The development of China's Circular Economy: From the perspective of environmental regulation

Abstract

While achieving rapid economic growth, the pressure caused by environmental pollution and resource depletion has increasingly become a bottleneck in China's economic development, making the development of a circular economy particularly important. The extant literature has not focused on the influence of environmental regulation on a circular economy performance. This study uses the metafrontier global direction distance function (Metafrontier-Global-DDF) super-efficiency data envelopment analysis (DEA) model to estimate the circular economy performance and decomposition values of circular economy growth rate in 286 prefecture-level cities in China from 2003 to 2018. It further tests the influences of environmental regulations on circular economy performance and its influencing mechanism. The results show that environmental regulation can play a linear role in promoting the performance of the circular economy, mainly through the “catch-up effect,” while “innovation effect” and “demonstration effect” have not yet played an effective role. This study provides evidence for the performance evaluation of the circular economy in China and the relationship between environmental regulations and circular economy performance. The future development of a circular economy still needs the active development of circular economy technology in each city. The role of the “innovation effect” and “demonstration effect” in improving the performance of the circular economy should be further enhanced.