The Study On The Impact Of Environmental Regulation To Industrial Performance Of Manufacturing In China

With the growing problem of environmental pollution, national governments have strengthened environmental regulation, and developed or improved the tools of environmental regulation to solve environmental problems. Weather the environmental regulation is efficient or not, it depends on the size of its social benefit and social cost. If the size of benefit outweighs the cost, it implies that environmental regulation is efficient. The cost of implementing environmental regulation includes direct and indirect cost. But in practice, these costs are difficult to quantify. Even though environmental regulation can play a role in pollution-control, but it will definitely affect the behavior of enterprises and market structures, thereby affecting the economic performance of the industry. Sound environmental regulation should achieve a balance between pollution-control and minimal adverse effects on industry performance. The objective of environmental regulation is achieved by specific policies of environmental regulation. At present, there are three types of environmental regulation: command and control policy, market-based policy and information disclosure and participation. Different policies have different social cost and different influence on industrial performance. Because of certain standards and measures, even tools belong to the same type of policy differ from cost and affect industrial performance in different ways. Therefore, only to comprehensive understand and analyze the extent of the impact of environmental regulation on industrial performance, we can evaluate the implementation of environmental regulation.First, this article describes, in theory, three different types of environmental regulation combined with the current status of environmental regulation in China, and sum up their different roles. Then it analyzes the mechanism of the impact of environmental regulation on industrial performance. The direct effect conducted through production cost and the indirect effects conducted through the entry of enterprises and technical innovation affect industrial performance together. Based on theory, it uses econometric models and China's industrial data from 1998 to 2007 to test the degree of the impact of environmental regulation to enterprises' entry, technical innovation and industrial performance. The results show that intensity of environmental regulation positively correlate with the entry of enterprises and technical innovation. It means that not only environmental regulation does not become barriers to the entry of enterprises, but also there are attractive factors for enterprises to enter. Environmental regulation can stimulate enterprises to innovate for improving the ability to respond to environmental regulation. Empirical results also show that environmental regulation and industrial performance have a negative correlation, indicating environmental regulation's positive effect does not outweigh its negative effect for industrial performance.Based on the results of theoretical research and empirical analysis, this paper presents a few suggestions to improve environmental regulation and enhance the enterprises' response capability to environmental regulation .