The Impact Of Environmental Regulation On Industrial International Competitiveness

In the context of economic globalization and trade liberalization, China’s economy and trade develop rapidly. China is the second-largest economy, the largest exporting country and the second largest importing country in the world. And industrial international competitiveness increases markedly. Since the 2008 financial crisis, a big dose of gravity has hit the China’s industrial international competitiveness as the world economy slows, world demand shrinks, protectionist urges simmer and emerging economies emulate. So the industrial international competitiveness is still important. But with the acceleration of economic growth, environmental damage is hugely worsened, and a set of environmental problems arise, such as warming, ozonosphere destroying, acidification, water pollution and smog. To address the rising environmental problems, our government launches laws, regulations and policies. Against this background, it’s necessary and urgent to study the relationship between environmental regulation and industrial international competitiveness, exploring the road which combines international competitiveness and environmental protection.Firstly, this paper systematically combs the research on the relationship environmental regulation and industrial international competitiveness, then summarizes the argument and insufficiency in existing research, and then makes the theoretical analysis of the impact mechanism of environmental regulation on industrial international competitiveness from the perspectives of cost and non-cost. On this basis, this paper constructs indicators of pollution intensity, environmental regulation intensity and industrial international competitiveness intensity of 22 manufacturing industries of China during 2003-2012. According to the calculation of pollution intensity, this paper defines cleaning industries and pollutional industries. According to the calculation of environmental regulation intensity and industrial international competitiveness intensity, this paper conducts the descriptive statistical analysis on environmental regulation and industrial international competitiveness. By using Heckscher Ohlin Vanek extended model, this paper constructs a dynamic panel data and analyzes the impact of environmental regulation on industrial international competitiveness from these perspectives:the overall, cleaning industries and pollutional industries, and cottage industries.The empirical results show that environmental regulation intensity and industrial international competitiveness intensity increase over time. Cleaning industries’ environmental regulation is higher, while pollutional industries’ environmental regulation is lower. Environmental regulation is an important factor that affects industrial international competitiveness. There is a positive U-shaped relationship between environmental regulation and industrial international competitiveness. Now China’ environmental regulation is at the left of the inflection point, and promoting the strength of environmental regulation is not conducive to industrial international competitiveness. But the moderate environmental regulation after the inflection point is conducive to the enhancement of industrial international competitiveness. Cleaning industries’ inflection point is higher, while pollutional industries’ inflection point is lower. In terms of detailed industries, most industries’ environmental regulation has a measurable impact on industrial international competitiveness. The impact of labor on industrial international competitiveness still exists; meanwhile the impact of capital and technology on industrial international competitiveness improves gradually. Finally, according to the research findings, this paper presents suggestions, including improvements of environmental regulation system suitable for different industries, technology development of technology sensitive industries, and environmental regulation of segmented chain.