Economic growth and the environment in China: An empirical analysis of productivity

China is an economic powerhouse with annual economic growth averaging close to 9% over the last 25 years. However, as a result of this extremely rapid economic growth, the scale and seriousness of its environmental problems are clearly evident. Consequently, a number of environmental problems, including growing energy consumption, heavy reliance on coal and increasing air pollution are threatening China's sustainable future. The principal focus of this paper is to measure total factor productivity within a joint-production model that considers both market and environmental pollution variables and employs unique province-level secondary industry data over the period 1992-2003. The results indicate that although China began implementing new environmental policies in the late 1970s, and although the stringency of these regulations is increasing, there is no short-term positive benefit associated with their implementation. However, some environmental productivity measures, such as wastewater treatment, have exhibited an increase in managerial efficiency.