The Impact of Foreign and Indigenous Innovations on the Energy Intensity of China’s Industries

Abstract

China’s industrial sectors have an approximate consumption amounting to 70% of the aggregate power of the entire country. Investigating the driving forces of the decline in the energy intensity is essential for accelerating China’s conversion into a low-carbon economy. Nowadays, there has been no agreement as yet when it comes to the impacts of China’s industrial sectors on energy intensity. The current research work studies the impacts of key driving forces, in particular foreign as well as indigenous innovations, on China’s industrial energy intensity in 34 industrial sectors between 2000 and 2010. Linear and nonlinear analysis methodologies are put to use. The linear empirical findings show that indigenous innovation primarily contributes to driving down the industrial energy intensity across the sampling duration. The foreign innovations, which take the shape of FDI as well as imports, are seen as benefiting the decline in industrial energy intensity; on the other hand, exports ramp up the industrial energy intensity. An additional investigation, on the basis of the panel threshold framework, indicates that the impact of foreign innovations by means of openness as well as industrial energy intensity has an association with the technological absorptive potential. The empirical evidence puts forward some pivotal inferences for policymakers with regard to China’s declining industrial energy intensity—for instance, exploitation of the maximum benefit associated with the technology spillovers; in addition, it is important to take into consideration the attributes and scenarios that impact industrial energy intensity.