Environmental improvement or industry enhancement? A case study on the impact of environmental regulations on Chinese automobile industry

Developing countries are encouraged to pursue environmental protection and industrial development simultaneously, although it is a big challenge to reach win-win situation. This study explored the relationship between environmental regulations and the industry enhancement in developing countries through conducting an empirical analysis of the impact of environmental regulations on Chinese automobile industry. In the empirical analysis, a total of 64 Chinese automobile enterprises were investigated, the Malmquist index of total factor productivity was adopted to determine the productivity of Chinese automobiles, and the two-step system Generalised Method of Moments(GMM) estimation was used for the regression analysis. The results showed that environmental regulations negatively affected the productivity and technology of Chinese automobile industry during 2004–2018. The production cost of automobile industry in China was rising sharply, and the productivity and technological progress of Chinese automobile industry were impeded significantly. The case of Chinese automobile industry illustrated that strict environmental requirements can negatively impact industry productivity by increasing production costs and squeezing industry profits.