Regional competition, rural pollution haven and environmental injustice in China

Under intense fiscal pressure, China's local governments raced against each other to offer business-friendly policies to mobile industries. Lax environmental enforcement was widely adopted across the country and many poor regions became havens for polluting factories. We argue that this adverse effect went deeper than the interjurisdictional competition argument. Within each jurisdiction, urban and rural communities engaged in a similar rivalry. Local governments, facing stronger societal environmental pressure from urban communities, prioritized urban environment and allocated fewer administrative resources to rural environment enforcement. As a result, polluting enterprises found refuge in the rural part of these jurisdictions. We merge a national firm registry database with a national survey of polluting enterprises firms and find strong evidence supporting this hypothesis. Our research extends the scope of the pollution haven hypothesis from an inter-jurisdictional dimension to the urban-rural divide, a source of environmental injustice that is understudied in the literature. Our study of firm location choices also complements current researches on Chinese rural pollution by high-lighting the political and economic causes of pollution.

Automated summary

Amid fiscal pressure, Chinese local governments competed to offer business-friendly policies, resulting in lax environmental enforcement and a concentration of polluting factories in poor regions. Urban and rural communities within each jurisdiction also engaged in a rivalry, with local governments prioritizing urban environment due to societal pressure and allocating fewer resources to rural environment enforcement. This led to polluting enterprises seeking refuge in rural areas. Our study provides evidence supporting this hypothesis and expands the pollution haven concept to the urban-rural divide, highlighting the political and economic causes of rural pollution in China.