RESEARCH ON THE IMPACT OF DIGITAL FINANCIAL INCLUSION ON INCLUSIVE GROWTH IN RURAL CHINA

Author: REN XU

Issue: 2023-2024

Abstract:

The study explored the impact of digital financial inclusion development on rural inclusive growth in China. Based on quantitative analysis method analyzed the quantitative relationship between digital financial inclusion and rural inclusive growth in aspects of total effect, sub-effects, mediation effect and heterogeneity impact. This study gathered the quantitative data from yearbook materials such as China Statistical Yearbook, China Rural Statistical Yearbook, China Education Statistical Yearbook and Peking University Digital Financial Inclusive Index about 31 Chinese provinces between2012 and 2021, and the data used were panel data. This study initially calculated the rural inclusive growth index using the entropy approach in order to better understand the effect of digital financial inclusion on rural inclusive development. Taking into account the endogenous, this study chosen a two-way fixed-effect model of dynamic panel, while OLS estimation method and LSDV estimation method were used to estimate the models. First total effect, sub-effects and robustness of the impact of digital financial inclusion on rural inclusive growth be tested. Then mediation model and group regression were utilized in testing the mediation effect with rural human capital and infrastructure construction and heterogeneity impact with differences in western, middle and eastern areas in China. Through the above analysis, the total effect, sub-effect, mediation effect and heterogeneous impact of digital financial inclusion on rural inclusive growth were finally obtained quantitatively. Finally a qualitative analysis, based on semi-structured interviews with rural residents in China, to explore the impact of digital financial inclusion on rural inclusive growth. First, this study designed an interview outline focusing on whether digital financial inclusion had an impact on rural inclusive growth, what kind of impact it had, what would affect it, and whether the external environment would change the impacts. Using the convenience sampling method, 12 rural residents from representative provinces in central, eastern and western China were selected for semi structured interviews, with rural household registration or mainly living in rural areas, who had a sense of identification with digital financial inclusion and rural inclusive growth. After conducting face-to-face, telephone or online interviews with the above interviewees according to the interview outline, the relevant interview data were collected.

In general, digital financial inclusion had a comprehensive promoting effect on rural inclusive growth, specifically, digital financial inclusion could promote rural inclusive growth by promoting rural human capital and rural infrastructure construction. At the same time, the impact of the above-mentioned digital financial inclusion on rural inclusive growth would have different impact results depending on the location of the rural region in the central, eastern and western regions, specifically, the above impact was the largest in western China, then was the central region, and the eastern region was the last. One lag of rural inclusive growth and rural fiscal expenditure had positive impacts on the current period of rural inclusive growth, but rural consumer price index had a negative impact on rural inclusive growth. Based on the conclusions, some recommendations were put forward focusing on the impact of digital financial inclusion on rural inclusive growth. The national decision-making department should advocate the development of digital inclusive financial services in rural areas, reduce the price level, expand fiscal expenditure, and develop rural infrastructure construction in general. It should strive to narrow the actual gap in education, medical care, social security, etc. caused by household registration status, strengthen education and health support for rural families, and improve the quality of rural residents’ human capital. At last it should provide favorable policy and tax facilitation for financial institutions. The rural grassroots governments should actively contact financial institutions and invite them to carry out suitable digital financial inclusion services, such as financing and investment business suitable for local economic development, based on agricultural industry, infrastructure construction, environmental protection and so on. The regional financial institutions should improve the organizational system and product system serving rural markets, establish richer needs and application scenarios for rural residents. The regular teach-in of digital inclusive financial knowledge should be carried out. The rural residents should keep learning, especially learn how to use digital products such as mobile phones and computers, minimize the digital divide effect through their own efforts. With an in-depth understanding of their own financial needs and risk tolerance, they could appropriately choose digital financial products and invest.

Keywords: Financial inclusion, rural planning, countryside growth