The Impact Of Environmental Regulation On China’s Trade Competitiveness

In recent years, Chinese trade was raced ahead of global average growth. As one of the three carriages to stimulate economic growth, trade providing an inexhaustible motive force for the sustainable development of China’s economy. However, sectors where China is globally competitive are labor-intensive industry. These kinds of industries lack of technology and brand of their own, which makes them remain at the lower value-added part of the global chain. Despite the large amount of trade, China profits little from it. In this situation, trade competitiveness is too important to be ignored. At the same time, the emerging environmental costs that have accompanied rapid growth is having an increasing impact on people’s daily life. It’s urgent to clean up the country’s environment. Each country must balance the contradictions of trade competitiveness and environmental protection in the process of sustainable development.Under this background, this paper selects 30 industries’data from 2001 to 2012 studies the influence of the environmental regulation on trade competitiveness using threshold panel method. The study suggests that:Firstly, the impact of environmental regulation on trade competitiveness has a significant threshold effect. When the environmental regulation is loose, the strengthening of it will weaken the trade competitiveness to some extent; when the environmental regulation is strict, the strengthening of it will enhance the competitiveness of enterprises. In the long run enterprises can realize win-win situation of environmental protection production and trade competitiveness. In pollution industry, environmental regulation may inhibit the development of trade in the first stage and then promote it. The environmental regulation has precisely the reverse effect on trade competitiveness in cleaning industry. Secondly, physical capital and human capital have an inverted U-shaped effect on trade competitiveness. Enterprises can enhance its trade competitiveness through the accumulation of physical capital and human capital in a certain range. But over accumulation of the two elements is not conducive to the promotion of trade competitiveness. Thirdly, foreign participation and innovation efficiency can significantly improve the trade competitiveness, but the cross effect of foreign participation and environmental regulation is not conducive to trade competitiveness.Based on the empirical conclusions, we proposed that China may strengthen environmental regulation according to the severity of pollution. In addition, the government should use various forms of regulation flexibly, pay attention to the implementation of supporting policies and develop green consumption habits to create a good policy environment for environmental regulation...