Will economic infrastructure development affect the energy intensity of China's manufacturing industry?

Abstract

China's manufacturing industry consumes more energy than the total amounts of Germany, Britain, France, Spain and Japan combined, and has a substantial impact on energy conservation and emissions reduction. This paper investigates the influence mechanism of economic infrastructure on the energy consumption and energy intensity of the sector. Using the China's provincial data during the period 2003–2016, the profit function is applied to incorporate infrastructure into the input-output system, and to avoid the endogenous problems caused by the reverse causal relationship between energy consumption and infrastructure construction. The empirical results indicate that economic infrastructure construction will increase energy consumption and reduce the energy intensity in the long term. Although the energy consumption effect of infrastructure in the central and western regions is less than that in the eastern region, the energy intensity of the western region declines the most due to the infrastructure construction. Based on the results of this paper, some policy implications are discussed. This paper also offers some targeted policy recommendations to improve policy design of the government.