Research On The International Competitiveness Of China's Manufacturing Industry Under Factor Price Distortion And Tightened Environmental Regulation

Since the reform and opening up,by continuously undertaking global industrial transfer and gradually integrating into system of international industrial specialization,China has become the largest country for manufacturing industry relying on its traditional comparative advantages and export-oriented development strategies.Rapid economic growth also depends on the development of manufacturing industry to a large extent.However,the development was built on basis of factor price distortion and sacrificing resources and environment.China's manufacturing enterprises are also located in labor intensive and low value-added position of global value chain,large in scale but weak in competitiveness.In the post financial crisis era,muted recovery of developed economies and falling economic growth of emerging markets resulted in continuous downturn of global economy.Decline in export growth and economic downturn has become the new normal of Chinese economic development.In addition,rising wages and prices of land,energy and raw materials led to an era of meager profit for "Made in China" with the continuous tightening of environmental regulation.Whether the comparative advantages of manufacturing industry would be gradually eroded by the increasing labor costs and improving environmental standards and step into the comparative advantage trap?And whether a comparative advantage vacuum would emerge before the new comparative advantage formed?In order to answer these questions,it's necessary to make an in-depth study of current situation and development trend of China's manufacturing industry's international competitiveness,an accurate understanding and analysis of the existing and potential comparative advantages is also indispensable.Under this background of research,by constructing a FRIT framework comprising of four main influencing factors including factor price,environmental regulation,institution and technology innovation,this paper evaluated the international competitiveness of China's manufacturing industry at industry and region levels.The results showed that overall international competitiveness of China's manufacturing industry fluctuates around a growth trend,but competitiveness of different industries varies greatly.Regional competitiveness evaluation results indicated that east region the highest,west region on the middle level and central provinces the lowest but on steadily increase.Factor price and institutions contributes the most for industrial competitiveness,influence of technological innovations is on the steadily rising tendency,and environmental regulation is a shortage which has positive effect but hasn't formed a new source of competitiveness yet.Therefore,to avoid falling into the comparative advantage fault of China's manufacturing industry,an intensive study of the influence mechanism of factor price distortion and environmental regulation on the international competitiveness of manufacturing industry is a necessity,which provides the theoretical support to realize kinetic energy conversion of economic development from relying on capital and labor input to increasing productivity.Factor price distortion generates profound and lasting impact on development of manufacturing industry.By employing a CES production function to combine factor price distortion and technological progress bias into a unified theoretical framework,this paper analyzed the impacts of factor price distortion on international competitiveness of manufacturing industry,and empirically studied the direct influence of price distortion on competitiveness of manufacturing industry and its indirect influence resulting from technological progress bias using dynamic panel model.The research revealed that both capital and labor factor prices of China are negatively distorted,absolute price distortion of capital is more severe,and relative price distortion of labor is more serious.Overall technological progress performs capital biased characteristic,price distortion is the main factor affecting technological progress bias.Effects of price distortion on competitiveness of manufacturing industry have significant industrial heterogeneity,its indirect impact by influencing technological progress bias is also closely related to industrial factor intensity.Eliminating factor price distortion is a general trend,but whether this will lead to higher factor prices,reduce the advantage of low factor cost,and further hinder upgrading of competitiveness of manufacturing industry?As an intensive study of this topic,this paper employed manufacturing industrial panel data.to analyze the influences of price changes of raw materials,labor and capital factors on the international competitiveness of China's manufacturing industry.The paper revealed factor price's impacts on manufacturing industrial competitiveness present directional differences in industry and factor level.Influence of rising raw material prices on international competiti-veness of manufacturing presents U-type.However,the prices of real wages and capital tend to rise after a fall in the influence like inversed U-type.This paper discussed relations of environmental regulation and competitiveness of manufacturing industry in two aspects.On one hand,by constructing simultaneous equations on the perspective of environmental regulation,this paper empirically studied relations of technical innovation,capital deepening and international competitiveness.The research indicates that there is a positive interaction effect between technological innovation and the competitiveness of the manufacturing industry,which contributes to the sustainable development of manufacturing industry,but the problem of capital over-deepening has begun to.emerge.Environmental regulation has a significant positive impact on the three,and verified the "Potter hypothesis".On the other hand,we also studied social effects of environmental regulation.By conducting a theoretical analysis and panel estimation based on double-nested CES model,we found environmental regulation plays positive role in promoting skill premium.Then,mediating effect model revealed multi-dimensional influence of environmental regulation on competitiveness,there're both direct environment-economy effect and significant intermediary effect by affecting skill premium,but the coefficient of mediating variable contrast to our expectation.Therefore,we further set a threshold panel model which shows that effects of skill premium on industrial competitiveness possess a feature of dual-threshold effect.At a lower level of skill premium,it has significant positive impact.When exceeds left-side threshold,it will hinder further enhancement of industrial competitiveness due to reasons like skill-demand mismatch.However,higher skill premium is conducive to better strengthen positive effect of environmental regulation.