Article
Environmental Effects of Credit Allocation Structure and
Environmental Expenditures: Evidence from China
Qiming Yang
1
, Jun He
1,
*, Ting Liu
1
and Zhitao Zhu
2
Citation: Yang, Q.; He, J.; Liu, T.;
Zhu, Z. Environmental Effects of
Credit Allocation Structure and
Environmental Expenditures:
Evidence from China. Sustainability
2021, 13, 5865. https://doi.org/
10.3390/su13115865
Academic Editor: Ioannis Nikolaou
Received: 23 April 2021
Accepted: 19 May 2021
Published: 23 May 2021
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4.0/).
1
School of Management, University of Science and Technology of China, Hefei 230026, China;
yqmsir@mail.ustc.edu.cn (Q.Y.); tingliu@ustc.edu.cn (T.L.)
2
Institute of Advanced Technology, University of Science and Technology of China, Hefei 230026, China;
andyzzt@mail.ustc.edu.cn
* Correspondence: hejun@ustc.edu.cn
Abstract:
This article studies how the allocation structure of bank credit capital between state-owned
and private enterprises and government environmental expenditures affect environmental pollution
in China. The present literature argues that credit allocation and government environmental expendi-
tures may play an important role in environmental quality improvement. However, these studies
rarely consider the credit allocation structure between State-owned enterprises (SOEs) and private
enterprises; in addition, they overlook the interaction effects of credit allocation and government
environmental expenditures. Based on these, we put forward three hypotheses. Moreover, the study
applies relevant spatial data for 2011–2017 from 31 provinces in China to a spatial econometric model,
and the results indicate that (1) environmental pollution among provincial regions shows a significant
positive spatial autocorrelation. (2) Environmental expenditures and environmental pollution display
an inverse U-shaped relationship, which supports the numerical simulation results. (3) The interac-
tion effect of credit allocation structure and environmental expenditures on environmental pollution
is significantly positive, which means that the allocation of more credit capital to private enterprises
will restrain the effect of government environmental expenditures. With the increasing significance of
environmental protection in China, it is necessary to strengthen the supervision of private enterprises’
environmental pollution behavior, expand government expenditures on ecological protection, and
promote regional collaborative environmental governance to improve environmental quality.
Keywords: environmental pollution; empirical research; spatial econometric; China
1. Introduction
After decades of rapid economic growth, development in China has achieved out-
standing results. However, environmental problems caused by economic development
have gradually emerged [
1
]. According to the Environmental Performance Index: 2018
Report, China ranks 120th, and the country’s air quality ranks fourth from last internation-
ally. Data from the National Bureau of Statistics of China show that the average annual
growth rate of China’s government environmental expenditures exceeded 13%, which is
much higher than China’s average annual GDP growth rate from 2011 to 2019. Environ-
mental pollution and the high cost of pollution control have already affected the economy’s
high-quality development [2].
In the modern economic system, bank credit resources are an important support
for industrial development, and enterprises are highly dependent on external financing
sources [
3
]. However, the scarcity of credit resources has led to competition for credit
resources among enterprises. SOEs constitute a key part of economically dominant indus-
tries [
4
]. Under the political connections between SOEs and the government, SOEs can
obtain implicit guarantees from the government, which reduces the performance cost of
debt contracts, thereby gaining more credit resources. Due to a lack of credit resource sup-
port, private enterprises may reduce environmental investment to maintain operations and
Sustainability 2021, 13, 5865. https://doi.org/10.3390/su13115865 https://www.mdpi.com/journal/sustainability
