Dual and Synergistic Roles of Environmental Regulation and Industrial Upgrading on Green Finance-GTFP Nexus in China

Abstract

Green finance (GF) is pivotal for driving China’s green transition, yet the complex interaction between environmental regulation (ER) and industrial upgrading (IU) in this process remains underexplored. Using balanced panel data from 232 Chinese cities (2010–2022), this study empirically investigates the impact of GF on Green Total Factor Productivity (GTFP) employing two-way fixed model. The baseline results demonstrate that GF exerts a significant and robust positive impact on GTFP. Crucially, the mechanism analysis reveals a structural asymmetry in moderation: Industrial upgrading acts as a robust positive moderator, serving as a prerequisite for unlocking financial efficacy, whereas the linear moderating effect of environmental regulation is conditional and less pronounced. Further threshold analysis confirms a non-linear synergistic mechanism, indicating that the efficacy of environmental regulation is contingent upon specific matching intervals of industrial structure rather than simple linear superposition. These findings provide empirical evidence for coordinating "policy–finance–structure" mechanisms through non-linear threshold effects to optimize urban green productivity.