Chinese Characteristics of ESG Under Market Competition and Globalisation

Ruohan Wu, Zheng Jiang and Huimin Shi

The World Economy, 2025, vol. 48, issue 4, 779-800

Abstract: We empirically examine how market competitiveness, which is subject to the influences of globalisation, affects Chinese firms' ESG (environmental, social and governance) performance. We acquire detailed information on A‐share listed Chinese firms between 2011 and 2020 and use foreign tariff shocks as instrumental variables of market competitiveness to control for endogeneity. We find that a higher market concentration (i.e., a lower level of market competition) significantly improves firms' ESG ratings. This finding remains robust under various instrumental variables of globalisation influences, various measurements of market competitiveness, various measurements of ESG and various empirical methods. Our mechanism analysis further reveals that market concentration takes positive effects primarily on state‐owned firms' ESG, especially their corporate governance. We attribute this finding to the Chinese characteristics of economy, where government power‐ and state‐owned firms play crucial roles. By studying determinants of Chinese firms' ESG performance by their ownership structures, we fill an important literature gap and provide a better understanding of the Chinese economy. JEL Classification: L22, F18, F43, Q56

Date: 2025
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