Can Digital Finance Narrow the Household Consumption Gap of Residents on Either Side of the Hu Line?

Abstract

The Hu line is a geo-demographic demarcation line in China. The eastern side of the line supports more than 96% of the population, despite constituting less than 44% of the national territory. The domestic household consumption level gradually exhibited an asymmetrical spatial pattern, with the Hu line serving as a demarcation line spanning from the north to the south. Continuous advancements in network and digital development domestically have allowed for an integration of digital technology with traditional financial services, thereby creating digital finance. Based on this, can digital finance narrow the household consumption gap among residents on both sides of the Hu line? By applying a geographical detector that could empirically detect the spatial causality, this paper aimed to explore whether digital finance can narrow the gap between the consumption levels of residents on both sides of the Hu line. The study results indicated that digital finance was a key factor influencing domestic household consumption. Combining digital finance with other factors such as marketization degree, the urban–rural income gap, and the urbanization level, our understanding of how it affects household consumption was further enhanced. Digital finance and household consumption levels had the same spatial structure, with the Hu line serving as their spatial axis. Additionally, the southeast side of the Hu line had significantly higher consumption levels than the northwest side. Digital finance in provinces on the southeast side of the line improved household consumption and simultaneously shared the positive benefits with neighboring provinces. In contrast, digital finance in provinces on the northwest side of the line decreased household consumption and shared this negative impact with neighboring provinces. We believe this study has provided a new perspective for academia to explore the relationship between the development of digital finance and residents’ consumption levels.

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