This paper aims to the debate on the nexus between informal economies and the environment by investigating the long-term dynamic impacts of China 's informal economies on pollution and considering regional differences in informal economies ' pollution. This paper uses the Multiple Indicators Multiple Causes (MIMIC) model to estimate the size of informal economies and employs econometric models to examine their relationships to pollution based on provincial-level panel data from 2000 to 2017. The results indicate that informal economies' effects on environmental pollution are not purely positive or negative. Rather, our model indicates that there is an inverted U-shaped relationship between informal economies and pollution in the long run in China; this means that the level of environmental pollution increases at first and then decreases with the growth of informal economies. Further analysis shows that while this inverted, U-shaped relationship is significant in different regions of China, it is affected by different environmental impact factors. The paper concludes by discussing the policy implications for environmental protection and sustainable development.

This paper examines the rise of informal economies in China, a hidden driving force overlooked in studies on China's urbanization. Estimating the size of informal economies using the multiple indicators multiple causes model, the paper employs mathematical models to examine the driving effect of informal economies on urbanization and to reveal the paths by which such effect works. The results were as follows. (1) In 2018, the size of the informal economy in China accounted for 23.5% of GDP with an output value of 21.16 trillion yuan. (2) The informal economy had a driving effect on China's urbanization, and every 1-percentagepoint increase in its share of the GDP led to an increase of 0.291 percentage points in the urbanization rate. (3) The informal economy's effect on urbanization showed regional differences, decreasing in size from the eastern to the central to the western regions. (4) The informal economy drives urbanization through four paths -by promoting foreign direct investment (FDI), fixed asset investment (FAI), social consumption (SC), and secondary sector employment (SSE). Their effect sizes are ranked in descending order as follows: FDI > FAI > SC > SSE. This paper contributes to theories on urbanization dynamics and process in China by highlighting the role of the informal economy as a hidden economic power lurking in the city.