Does China’s Zero Growth Policy Promote Green Enterprise Entry? Evidence from the Agricultural Input Sector

Against the backdrop of global commitments to sustainable development and carbon neutrality objectives, the agricultural sector faces compelling imperatives to transition toward environmentally sustainable and resource-efficient production systems. Focusing on the critical role of agricultural inputs, this study investigates how China’s Zero Growth Policy for Fertilizer and Pesticide Use (ZGP), implemented in 2015, influences green transformation in the agricultural inputs sector through a quasi-natural experiment framework. Employing a staggered difference-in-differences (DID) design with comprehensive nationwide firm registration data from 2013 to 2020, we provide novel micro-level evidence on environmental regulation’s market-shaping effects. Our findings demonstrate that the ZGP significantly enhances green market selection, stimulating entry of environmentally certified firms, with effect heterogeneity revealing policy impacts are attenuated in manufacturing-intensive regions due to green entry barriers, while being amplified in major grain-producing areas and more market-oriented regions. Mechanism analyses identify three key transmission channels: intensified regulatory oversight, heightened public environmental awareness, and growing market demand for sustainable inputs. Furthermore, the policy has induced structural transformation within the industry, progressively increasing green enterprises’ market share. These results offer valuable insights for designing targeted environmental governance mechanisms to facilitate sustainable transitions in agricultural input markets.