Can the green finance improve export green-sophistication? New insights from China.

The green financial policy is one of the important policy tools for China to achieve the national carbon peak goal and carbon neutrality through financial means. How financial development affects the growth of international trade has been an important research topic. This paper uses the Pilot Zones for Green Finance Reform and Innovations (PZGFRI) implemented in 2017 as a natural experiment drawing on the relevant data of Chinese provinces' panel data from 2010 to 2019. It adopts a difference in difference (DID) model to assess the impact of green finance on export green-sophistication (EGS). The results report that the PZGFRI significantly improves EGS, and the result remains robust after robustness checks such as parallel trend and placebo. The PZGFRI improves EGS by boosting total factor productivity, industrial structure upgrading, and green technology innovation. Moreover, the role of PZGFRI in promoting EGS is significantly reflected in the central and western regions and the regions with low-marketization levels. This study confirms that green finance is an important factor influencing the quality improvement of China's exports, which provides effective evidence from the reality level for China to vigorously promote the construction of a green financial system in recent years.