Driving Mechanisms of Structural Upgrading in China’s Wood Industry: Perspectives on Environmental Regulation and Factor Substitution

Currently, China’s timber industry faces severe challenges such as structural imbalances and upgrading bottlenecks. Different from previous studies, this paper investigates the driving mechanisms facilitating the structural upgrading of the wood industry, aiming to provide empirical evidence for relevant policy formulation. Using panel data from 30 provincial-level administrative regions in China from 2011 to 2020, two-way fixed-effects econometric models are employed to empirically analyze the impact of core variables—specifically government environmental regulations, consumer demand, forest resource endowments, and labor factors—on industrial structure upgrading. The empirical results reveal a critical transitional reality: contrary to optimistic theoretical expectations, stringent environmental regulations currently impose heavy “compliance costs” that temporarily hinder structural upgrading. Instead, the upgrading process is primarily driven by the market-pull effect of domestic consumption upgrading. Furthermore, the industry exhibits a distinct capital-labor substitution trend, where over-reliance on traditional labor and primary forest resources significantly restricts modernization. Based on these findings, this paper proposes formulating region-specific industrial strategies, stimulating high-end green consumption, establishing ecological compensation mechanisms for resource-rich regions, and shifting vocational training towards digital and automated forestry skills to support industrial transformation.