Can structural loan policy promote low-carbon transition of manufacturing enterprises? New evidence from China

Abstract

This paper examines the energy impact of a policy toolkit of expanding medium- and long-term loan policy in the manufacturing industry in China. Based on a novel firm-level data from 2018 to 2021, this paper employs a difference-in-difference model to investigate the causal effect of finance on green transition. The results indicate that the implementation of medium- and long-term loan policies can effectively reduce the energy consumption of manufacturing enterprises and promote energy transformation. Among, for small and medium-sized enterprises and non-heavily polluting manufacturing enterprises, the role of state-owned enterprises is more significant. However, firms affected by the US-China trade war and the Federal Reserve’s interest rate hike are not significantly positively affected by lending policies. In addition, the expansion of medium- and long-term loan policies for the manufacturing industry can promote the energy transformation of the manufacturing industry by easing the financing constraints of enterprises, which has important theoretical significance for the implementation of China’s fiscal and taxation policies. Lastly, policies can improve the level of economic performance of firms and lead to an increase in the number of innovators in firms.