An Empirical Study on the Impact of Industrial Green Transformation on Economic Growth of China

Abstract

China’s transition toward greener industrial development creates potential long-term environmental and technological benefits but may also impose short-term adjustment costs on enterprises and regional economies. This study examines the relationship between industrial green transformation and regional economic growth in China. An industrial green transformation index is constructed using the entropy-weight method and five dimensions: green culture, green strategy, green innovation, green investment, and green emissions. The analysis uses panel data covering 30 Chinese provinces from 2005 to 2019 and incorporates information from 831 listed enterprises operating in energy-intensive, highly polluting, and resource-intensive industries. A dynamic panel model estimated through the system generalized method of moments is employed to account for the persistence of regional economic growth and potential endogeneity. The model also controls for financial development, industrial structure, human capital, fixed-asset investment, and technological innovation. The reported estimates indicate that industrial green transformation is significantly associated with lower contemporaneous regional economic growth. This negative relationship is observed in the national sample, western provinces, and the Yangtze River Economic Belt, although its estimated magnitude varies across regions. The findings suggest that cleaner inputs, environmental compliance, pollution control, and green research and development may increase enterprise costs during the initial transformation period. The inclusion of the green credit policy variable does not eliminate the negative association between industrial green transformation and economic growth. These results highlight the need for differentiated transition policies, targeted financial support, and measures that improve the commercialization of green innovation. Because the analysis primarily identifies short-term statistical relationships, the results should not be interpreted as evidence that green transformation reduces long-term sustainable growth.