The Pollution Content in China ’ s Trade

In consideration of China’s enormous trade volumes since opening up and huge trade surplus especially with the developed countries, it is worried that the environment is sacrificed in the process of trade liberalization in China. Employing the environmental input-output analysis, this paper attempts to investigate whether international trade aggravates the environmental issues. Comparing pollution actually embodied in exports and pollution avoided by importing, we find that (1) China surprisingly imports more “pollution embodiment” than its imports regardless of its enormous trade surplus in most of the IO years, and (2) China’s exports are consistently cleaner than its imports. Further projection for recent years also shows that even without technological progress the trade mix (composition effect) will not change the fact that China gains environmentally from international trade in terms of the air pollutants in this study. When Japanese IO table is used to represent China’s trading partners, the results are completely reversed indicating China’s heavy dependence on coal for energy as well as its relatively lagged production technologies.