The Interplay and Feedback Mechanism between Environmental Pollution and Economic Growth in China

China’s rapid economic growth has given rise to serious clashes with environment protection needs. In order to address the dilemma between environment protection and economic growth, a thorough investigation into the relationship between the two is fundamental to the formulation and implementation of environment policies. This paper uses econometric analyses of time-series data on industrial pollution and GDP per capita between 1980 and 2008, examines the long-term dynamic equilibrium and interplay between environment quality and per capita income in China, and obtains the following points. First, there is cointegration between economic growth and environment pollution in China. Second, the increase of per capita GDP has evident lag effects on environment quality. Third, the simulated structure of Generalized Impulse Response Function shows that the responses of environment quality indicators to the impulse of per capita growth rate are mostly fluctuant. Fourth, the results of variance decomposition show that the contribution of pollution indicators to the variance decomposition of GDP per capita is relatively small.