The energy efficiency advantage of foreign-invested enterprises in China and the role of structural differences

•FIEs are more energy efficient than domestic enterprises in China.•The structural difference accounts for 81.93% of the overall energy efficiency advantage of FIEs.•The technology difference dominates the intensity advantage of FIEs within the same trade mode.

In this paper, we use a unique input-output table that distinguishes trade mode and firm ownership to discuss the relative advantage of foreign-invested enterprises (FIEs) in Mainland China. It is found that FIEs outperform Chinese owned enterprises (COEs) in terms of total energy intensity by 16.97%, 14.97% and 42.89%, respectively, for the processing, non-processing and overall production in the industrial sector. Further decompositions show that structural differences across industries (and trade mode) contribute positively and account for 65.33%, 26.28% and 81.93% of the relative advantage of FIEs for processing, non-processing and overall production. Failure to capture heterogeneity across trade mode may lead to distortion of the picture of how final demand structure differences influence the energy efficiency advantage of FIEs over COEs in China.