Research On The Impact Of China Local Financial Development On Environmental Pollution

Since industrialization,the economies of various countries have rapidly risen,and the continuous changes in production methods have driven the rapid growth of global GDP.The rapid development of the global economy has brought enormous pressure to the ecological environment.As the world’s largest developing country and the world’s second largest economy,China has achieved a qualitative leap in its total economic output during the industrialization process.However,this extensive economic development model has damaged China’s ecological environment and is not conducive to the sustainable development of the national economy.Therefore,our government actively formulates various green finance policies,which lays the foundation for local financial institutions to develop green finance.As a representative local financial institution,China city commercial banks(CCBs)have close relations with the government and enterprises.Can the local finance represented by CCBs conform to the development of green finance and reduce the level of local environmental pollution? If possible,what is the mechanism for reducing environmental pollution? Based on this,this paper collected data from 284 prefecture level cities in China from 1998 to 2020 and conducted empirical research on the relationship between local financial development and environmental pollution using panel instrumental variables model and multi period difference-differences model.Specifically,the relevant literature at home and abroad was first summarized and organized,and the literature on local financial development and environmental pollution was sorted out,clarifying the connotation of local financial development and environmental pollution.In view of the innovation of the existing literature,based on the theoretical research of green finance theory,information asymmetry theory,government intervention theory and other theories,combined with the actual background of the establishment of CCBs,this paper discusses the impact mechanism of local financial development on environmental pollution.Secondly,the development status of CCBs and their relationship with local financial development were analyzed,and the problems of traditional methods for measuring local financial development and the advantages of measuring based on quasi natural experiments were elucidated.Once again,the panel instrumental variable model and multi-period double difference model were used to empirically analyze the impact of local financial development on environmental pollution.Finally,we use the mediation effect model and the moderated mediation effect model to analyze the impact mechanism of local financial development on environmental pollution,and explore the reasons for the heterogeneity of this impact.The research results indicate that: firstly,there is a serious endogeneity problem between the traditional measurement of local financial development and environmental pollution.Without considering endogeneity issues,local financial development exacerbates environmental pollution.After considering endogeneity issues,local financial development reduces environmental pollution,and the selection of different instrumental variables may lead to significant deviations in the research results.Secondly,the establishment of local financial development represented by CCBs has reduced local environmental pollution.Considering the differences in financial development levels among different regions based on the expansion of CCBs and the length of their establishment,it was found that higher levels of local financial development are more effective in reducing environmental pollution.After a series of tests such as trend analysis,PSM-DID,and endogeneity tests,the conclusion remains stable.Thirdly,with the improvement of urban economic level,population size,and marketization,the establishment of CCBs has a more significant impact on reducing environmental pollution.Fourthly,the establishment of CCBs can reduce environmental pollution by enhancing the city’s innovation capacity,attracting FDI inflows,and promoting industrial structure upgrading.Among them,the absorption effect of foreign investment is the most obvious,followed by the innovation enhancement effect,and the industrial upgrading effect is the weakest.Fourthly,in cities with high economic levels and large population,the heterogeneity of reducing environmental pollution caused by the establishment of CCBs can mainly be attributed to the impact on urban innovation capabilities;In cities with a high degree of marketization,the main reasons for heterogeneity are reflected in the impact on the city’s innovation ability and the level of attracting foreign investment.Based on the research conclusions,this paper proposes the following suggestions:firstly,various regions should deepen the reform of CCBs,continuously improve the application of financial technology in CCBs,and increase the profitability and risk control capabilities of CCBs.Secondly,in cities with higher economic strength and a larger population,local governments should fully safeguard the position of CCBs in the financial system.Thirdly,cities with relatively low levels of marketization should appropriately reduce government intervention in the development of CCBs and make more use of the market to allocate financial resources.Fourthly,cities with lower economic levels and smaller population sizes should change their development philosophy of sacrificing the environment and reducing pollution from the source.This paper expands the research on local financial development and environmental pollution,enriching the micro mechanisms by which local financial development affects environmental pollution.