GVC participation and environmental pollution in China's manufacturing industry

This paper empirically investigates the impact of global value chain (GVC) participation on environmental pollution using data from China's manufacturing sector. A new Environmental Performance Index (EPI) is introduced as a proxy for assessing changes in environmental pollution. The key findings are as follows: Firstly, although total factor productivity (TFP) in China's manufacturing sector has not shown recent improvement, green total factor productivity (GTFP) has increased. This finding suggests an improvement in environmental quality. Secondly, an increase in the degree of GVC participation is associated with greater environmental pollution. Thirdly, an increase in the GVC position index across all industries in China contributes to a reduction in environmental pollution, suggesting that as production moves upstream, environmental quality tends to improve. Fourthly, however, in the case of energy‐intensive industries, this reduction in environmental pollution was not evident. These findings highlight the importance of directing governmental policies toward promoting forward GVC participation rather than backward participation, particularly for reducing environmental pollution. However, it is crucial to note that for energy‐intensive industries, shifts in GVC position toward the upstream may not necessarily result in environmental improvements.