Can China’s digital inclusive finance help rural revitalization? A perspective based on rural economic development and income disparity

Abstract

The development of digital inclusive finance in China can help alleviate the problems of the “three rural areas” and contribute to rural revitalization. The impact of digital inclusive finance on rural revitalization is examined by multiple linear regression, mediated effect model, and threshold effect model in a sample of 30 provinces in China from 2011 to 2020. It is found that (1) the digital inclusive finance index and its sub-indicators - the breadth of digital financial coverage and depth of digital financial use - can promote rural revitalization in China, but the digitalization degree of its sub-indicators does not have a significant linear effect on rural revitalization, but a “U” shaped relationship of first inhibiting and then promoting, with 2017 as the boundary. (2) The regional heterogeneity test reveals that the promotion effect of the digital financial inclusion index and its sub-indicators of digital financial coverage breadth and digital financial usage depth on rural revitalization is more significant in the eastern coastal and central inland provinces, and insignificant in the western remote areas. (3) The mediating effect test finds that digital inclusive finance in China can contribute to rural revitalization by promoting economic growth in rural areas and narrowing the income gap between urban and rural areas. (4) The threshold effect test reveals that there is a single threshold effect of digital inclusive finance and its three sub-indicators on rural revitalization in China. When the digital inclusive finance index and the three sub-dimensions are below the threshold value, they have a facilitating effect on rural revitalization, and after crossing the threshold value, their facilitating effect on rural revitalization becomes more significant. Based on the empirical analysis results, this paper puts forward suggestions for improving the development mechanism of digital inclusive finance, formulating differentiated financial support policies and strengthening financial supervision according to regional differences, and establishing a long-term mechanism for rural revitalization, to promote China’s rural revitalization.

Modified CPT-TODIM method for evaluating the development level of digital inclusive finance under probabilistic hesitant fuzzy environment

“…The biggest drawback of the traditional financial model is the problem of achieving the dual performance goals of economic and social benefits for MSMEs. Under the traditional financial environment, the difficulty of financing and the high cost of financing become the key issues that restrict the further development of MSMEs [57][58][59]. From the traditional economic theory, the less the capital, the higher the marginal return obtained, but the marginal return curve of capital in the traditional economic theory has changed due to risk uncertainty, information asymmetry, adverse selection and moral hazard, and lack of transaction cost.…”

The Mechanism of DIF’s Effect on Economic Growth: Evidence from Seven Countries

“…[15] Moreover, multiple studies point out that DIF's impact is biased-it is "more significant in the eastern coastal and central inland provinces, and insignificant in the remote western areas. [30] Parts of relevant literature emphasized sustainable growth and green economy, toward which scholars pose varying attitudes and where we see diverse findings and conclusions, which also reveals some impediments DIF faces. Hong et al found that DIF can "significantly increase China's agricultural green total factor productivity," which is confirmed by industrial structure improvement results from the previous findings.…”

“…[11] But these gains are not immediate; many studies found that there is a threshold effect from DIF in the form of a "U-shape"-DIF's benefits only show accelerated impact on growth after an inflection point before which DIF acts inhibitory. [30] Li et al further found that the effect of DIF on green total factor productivity "shows a trend in the middle, followed by the east, and later in the west," and the study also implied that "improving the agglomeration degree of producer services and optimizing the upgrading of the industrial structure" could help promote a green economy. [15] Moreover, multiple studies point out that DIF's impact is biased-it is "more significant in the eastern coastal and central inland provinces, and insignificant in the remote western areas.…”

“…Nevertheless, this entails talent attrition to more prosperous cities, leading to a "negative spatial spillover effect," and this discounts DIF's advantage brought on the local economy. One piece of evidence suggests that the central and "more remote western regions" [30] see a "significantly negative influence" [34] from DIF.…”

“…G20 claimed a "strong commitment to financial inclusion and recognized the benefits of universal access to financial services" and launched Global Partnership for Financial Inclusion (GPFI) to execute and enforce G20 Financial Inclusion Action Plan. [30] Inclusive finance is no new term for China. Like many developing countries, it endorsed and acknowledged that inclusive finance has societal implications and great potential for the joint economic development, particularly through achieving sustainable development goals (SDG).…”