Environmental Regulation Impact On The International Competitiveness Of Chinese Industries

In the recent years, Chinese government has been strengthening the environmental regulation in order to deal with the environmental issues. In the same time, the international environment of China's foreign trade is changing greatly, which arose the worry on China's international competitiveness of industries. Would the environmental regulation weaken China's competitiveness, thereby affecting the exports as well as economic growth? In order to find the answer, it is of urgent practical significance to research the effect of environmental regulations on the competitiveness of Chinese exports, and to explore an development path, which can obtain both export growth and environmental protection.For the complexity of measuring the international competitiveness of industry, this paper employs two different methods, to analyze environmental regulation's effects on industry competitiveness. Base on the input-output model which added the pollution control costs, we find that since 2003 when China's environmental regulation is more and more strict, the relative share of exports in pollution-intensive industries did not decline. The current environmental regulation only rise the price level of all industries in China 1.10-4.22%. And the potential effect of further enhancing environmental regulation is very limit. Using data envelopment analysis, we found that China's efficiency and productivity in pollution control has been improving, it will also help promote China's total factor productivity. Further regression shows that pollution control cost have a"U"type impact on pollution control efficiency as well as productivity, while the turning point is 4-6% by the ratio of pollution control cost to the total industrial added value.These findings suggest that environmental regulation has not cripple China's international competitiveness. The reason is, despite stricter environmental regulation would increase production costs, the environmental regulation would also benefit the domestic companies and enhance China's competitiveness by "cost saving" and other mechanisms. Moreover, given the possible changes in international trade environment, the environmental regulation may improve China's future international competitiveness of industries by the "first-mover advantage" mechanism. These mechanisms are the most important reason that we should not worry too much about environmental regulation.For China, another important resson is, changes in the management system can greatly improve the government efficiency, and arrive the "win-win" result of protecting environment keep international competitiveness of industries. This paper provides at least three viewpoints: firstly, in the environmental management system, the unity, authority and independence of environmental management department should be enhanced. Secondly, in the choice of policy instruments, it is considerable to construct a inter-regional and inter-industry pollution emissions market, and to utilize comprehensively public participation, corporate information, voluntary agreements and the green credit management. Finally, in regional policy, the environmental regulations in central and western regions should be stricter.