This paper investigates the impact of two types of environmental regulations (ERs), command-and-control environmental regulation (CACER) and market-incentive environmental regulation (MIER), on green total factor productivity (GTFP) through outward foreign direct investment (OFDI) in 30 provinces in China for the period of 2006–2019. The Global Malmquist–Luenberger (GML) Index based on non-radial directional distance function (NDDF) considering undesired outputs is used to measure GTFP growth at the provincial level. To explore the mediating effect of OFDI, the two-step econometric model and the non-linear mediating effect model are employed. The empirical results show that CACER has an inverted U-shaped impact on OFDI and a U-shaped impact on GTFP, while MIER has a linearly positive effect on OFDI and GTFP. The current intensity of CACER lies on the left side of the inflection point of the U-shaped curve. OFDI significantly positively influences the increase in GTFP and is a significant mediating variable in the relationship between ERs and GTFP. Moreover, the introduction of OFDI delays the appearance of the inflection point. Further analysis, taking into account the regional heterogeneity, indicates that the inverted U-shaped and U-shaped curve is still valid in the eastern and western area and that the mediating effect of OFDI on ERs in the western area is stronger than that in the eastern area. Based on these conclusions, policy implications are provided to improve GTFP in China.

China’s economic development has made world-renowned achievements which have subsequently brought serious environmental pollution problems. As a large manufacturing country, the industrial value added in China accounts for nearly 30% of the global share. However, the manufacturing industry lacks competence. Therefore, considering environmental protection issues while promoting manufacturing industry upgrading (MIU) is a critical goal for China at present. By applying panel data from China’s Yangtze River Economic Belt (YREB) from 2010 to 2019, this paper uses a spatial econometric model to study the effect of green finance (GF) on upgrading (hereafter, upgrading refers to the improvement of the manufacturing structure and the transition toward green manufacturing) the manufacturing industry. This study found that the impact of GF on MIU in the YREB is significantly positive. GF has a good positive spatial spillover effect. Moreover, the high level of urbanization and high freight volume have positive impacts, the impacts of foreign investment and government fiscal expenditure are significantly negative, and the effect of the level of human capital on upgrading is not obvious. Therefore, vigorously developing green finance, optimizing the environment for manufacturing upgrades, and cultivating green and high-quality talents should be the future direction of government policy formulation.