Studies On Effects Of The Environmental Regulation On International Competitiveness In China

Relationship between environment and international competitiveness stems from that international trade is an engine of economic growth and there is a close link between economic growth and environmental pollution and resource consumption. With the development of specialized production and the international division of labor, it has become reality for countries to trade based comparative advantages, so as to promote the rapid growth of the global economy and national GDP. However, the ensuing deterioration of ecological environment, environmental issues became worldwide difficult problems in economic development. In particular, with widespread concern about global warming and the increasing pressures of global environmental resources, the relationship between environmental regulation policy and international competitiveness increasingly deeply embedded in people’s vision.International community gradually realized the urgency of environmental pollution, so countries around the world improved their level of environmental regulation. But there are differences in production levels, environmental preferences and environmental self-purification ability among countries, so different environmental issues in different countries exhibited varying degrees of importance, and environmental regulatory standards among countries, especially between developed and developing countries is difficult to coordinate. The differences of environmental regulation standards lead to differences in comparative advantage and international division of labor, thus becoming an important factor of international competitiveness.China is in a period of rapid economic development and foreign trade has expanded rapidly, especially after entering the WTO enhancing the degree of trade liberalization. China has.become the world’s second-largest trading nation. At the same time, foreign directly investment also developed rapidly and China has become the world’s largest foreign investment destination. Foreign trade and direct investment has greatly promoted the rapid growth of the Chinese economy. But extensive foreign trade growth mode and indiscriminately absorbing foreign capital cause great damage to the environment. The environmental issues have become increasingly prominent in China. Air pollution, water pollution, waste pollution, desertification, soil erosion and other environmental problems become shackles of China’s economic development. Thus, in recent years, Chinese government complies with the international trend, and continues to strengthen environmental regulation efforts.The next period of time, the international economic situation faced to China is still complex and grim. Due to lacking of motivation to grow in global economic, the future international market demand remains in the doldrums and the foreign investment momentum continues to decline. With the continuous appreciation of the RMB real effective exchange rate, the competitiveness of Chinese exporting industries will be subject to a severe test. Meanwhile, more and more countries will use environmental protection as a pretext to take non-tariff barriers in order to improve the competitiveness of domestic industries and snatch the international market. So, how to formulate Chinese environmental regulations fitting for this stage of economic and social development to ensure the quality of the environment and resources protection, without reducing or even improve their international competitiveness and ensure long-term sustainable economic development will be be the problem needed to be solved currently. Environmental regulation and international competitiveness is a pair of interrelated and interdependent contradiction. Domestic and foreign environmental regulation level have a significant impact on a country’s comparative advantage, technological advances and direct investments, thereby affecting the industrial structure, trade structure and level of economic development of a country. So, how the changes of the domestic and foreign environmental regulation level impact Chinese international competition and what is the influencing mechanism, which will be analyzed in detail from three levels in this paper:Firstly, in the respect of the impact on trade competitiveness, through combing the relevant literature, we found that theoretical study about the impact of environmental regulation on trade competitiveness has been debate between traditional school and amendment of school, and there is not conclusive in the empirical research. The reasons are not only about the methodological, but also the data. This paper builded a expanded gravity model including environmental regulation and found that the bilateral trade volume was affected by the GDP of the two countries, multilateral resistance, the regulation of the import country and the export country. Then this paper used the2006-2011panel data of China and its27trading partners, based on the improved gravity model to do the empirical study and draw a conclusion:Domestic environmental regulation has cost-effective on China’s trade competitiveness; While foreign environmental regulation has Porter-effective on it. The combined impact is positive. China’s trade competitiveness of manufacturing industry and pollution industry tends to rise following the environmental regulation enhancing, which are in accord with reasonable theoretical expectation.Secondly, in the respect of the impact of technological competitiveness, the existing literature on the theoretical study of environmental regulation to promote technological progress identify with positive attitude, but did not get the unanimous conclusion in the empirical field, while lacking of the research on the influencing mechanism, especially on the influencing mechanism of China’s technological progress. According to Ambec and Barla (2002), this paper builded a entrust-agent model and found that environmental regulation can increase R&D investment and expected revenue of the enterprises simultaneoustly while meeting some certain conditions. Then, based on1999-2011provincial panel data of China, this paper builds a dynamic panel model and uses the SYS-GMM to analysis the impact mechanism of environmental regulation of China on the technological efficiency and finds that the effects of China environmental regulation on technological progress presents the first after rising downward trend; the relationship between the technical progress stimulated by the environmental regulation and economic development exhibits an inverted U-shape, which is accord with the theory of environmental Kuznets curve. When regional economic development reaches some level, the ratio of dirty industry decreased and at that time the function of enhancing environmental regulation to technical progress becomes weak little by little; The technical progress stimulated by environmental regulation achieved mainly through the technology import, which is because that the industries carried by China from foreign countries are all the industries which has older environmental technology.Thirdly, in the respect of competitiveness in attracting foreign investment, the existing literature generally considered that the low level of environmental regulation can become incentives to attract foreign direct investment.This paper argued that the absolute loose environmental regulation was not the main cause of the FDI. Growing up in the different institutional environmental, enterprises build different organization routines based on the tacit knowledge. Changing the organization routines leads to a high cost. So, the institution distance is the main cause to affect the enterprises’ strategy of the international expansion. Using logit model and panel data about113countries directly investing in China in2003-2011, this paper empirically testified and found that the intercountry distance of the environmental regulation, the degree of democracy and the policy stability have the negative relationship with the FDI. Because of these, China which has the loose environmental regulation attracted the FDI all from the countries which has also loose environmental regulation or from the pollution intensive industry, which causes the false appearance that China is the " Pollution Shelter"Finally, based on the conclusion of the above study, and on the influencing mechanisms and conduction mechanism of domestic and foreign environmental regulations on Chinese competitiveness about trade, technology and absorbing foreign investment, combined with China’s reality, this paper propose the coordinately development policy between environment and economy from the environmental policy, foreign trade policy and industrial policy.