Research On The Value Effects Of Digital Inclusive Finance

Since the 18th National Congress of the Communist Party of China,China has faced numerous challenges such as structural and systematic contradictions in the economy,unbalanced development,and sever environmental pollution.In response,the Party Central Committee under the leadership of Xi Jinping has proposed the implementation of the new development philosophy,which aims to foster a new development dynamic dominated by domestic flows while ensuring mutual reinforcement between domestic and international flows,and to promote high-quality development.In his report to the 20th National Congress of the Communist Party of China on October 16,2022,Xi Jinping emphasized that high-quality development is of paramount importance in building a modern socialist country.Development is the Party’s primary task in governing and rejuvenating the country.Without a solid material and technical foundation,it is impossible to build a modern socialist country.Therefore,it is crucial to fully implement the new development philosophy,adhere to the direction of a socialist market economy,prioritize high-level opening up,and accelerate the construction of a new development dynamic.Finance plays a key role in implementing the new development philosophy and promoting high-quality development as it acts as the lifeblood of the national economy.However,China’s financial system has long been subjected to extensive government intervention,resulting in high level of financial repression.Commercial banks tend to focus on serving large enterprises,high-net-worth individuals,and prominent customers,neglecting the needs of small and medium-sized enterprises and low-income individuals.In recent years,digital inclusive finance has emerged as a promising financial model due to the promotion of China’s inclusive finance policy and the development of information technologies.Driven by the entry of large internet companies into the financial industry,digital inclusive finance has successfully provided basic financial services to billions of individual users and millions of small and micro enterprises,significantly enhancing the inclusive finance level,promoting the digital transformation of the financial industry,and optimizing the allocation of financial resources.Given the strategic task of implementing the new development philosophy and the ongoing digital financial revolution,this thesis aims to explore the value effect of digital inclusive finance in promoting high-quality development.The existing literature on digital inclusive finance has mainly focused on its impact on specific aspects of the economy and society,resulting in fragmented research lacking systematization.Consequently,this thesis proposes a comprehensive analysis framework that examines the value effects of digital inclusive finance from financial value effect to economic value effect,and finally to environmental value effect.Additionally and correspondingly,this thesis conducts empirical research from the perspectives of bank lending,agricultural production,consumption,and green development to provide empirical evidence for the value effects of digital inclusive finance and address the gaps in existing research.The main findings of this thesis are as follows.Firstly,the literature review and theoretical analysis indicate that the impact of digital inclusive finance is highly aligned with the requirements of the new development philosophy.It can enhance the quality and efficiency of financial services for the real economy,promote China’s innovative,coordinated,green,open,and shared economic development.Specifically,in terms of the financial value effect,digital inclusive finance as a major financial innovation enables inclusive finance to achieve breakthrough development through digital technology empowerment.It reshapes financial thinking and behavior,changes the pattern of financial resource allocation,and provides new impetus for supply-side structural reform in the financial sector.In terms of the economic value effect,digital inclusive finance promotes innovative,coordinated,open,and shared development by alleviating financial constraints,facilitating market transactions,driving technological innovation,regional coordinated development,multinational operations of companies,mass entrepreneurship,and residents’income and consumption.In terms of the environmental value effect,digital inclusive finance affects green development through scale,technical,and structural effects of economic growth.Secondly,an empirical study from the perspective of bank credit reveals the financial value effect of digital inclusive finance on fairer allocation of financial resources.Using the Digital Inclusive Finance Index from Peking University and loan data from commercial banks,the study finds both spillover and extrusion effects of digital inclusive finance on commercial bank loans.The spillover effect promotes the scale of commercial bank loans,while the extrusion effect reduces it.The impact of digital inclusive finance on commercial bank loans is also found to vary across regions and bank characteristics.Knowledge and economic spillovers are identified as mechanisms underlying the spillover effect,while e-commerce development drives the extrusion effect.Further analysis shows that digital inclusive finance has a significant impact on loans of agriculture and household sector.These findings demonstrate that digital inclusive finance has a value effect on changing the allocation of financial resources,which contributes to promoting inclusive finance,facilitating supply-side structural reforms in the financial sector,and improving the quality and efficiency of financial services for the real economy.Thirdly,an empirical study from the perspective of agricultural production reveals the economic value effect of digital inclusive finance in promoting agricultural output.Using data from the China Family Panel Studies（CFPS）,the study finds that the use of digital inclusive finance by peasant households significantly increases agricultural output.The effects of digital inclusive finance on agricultural output are found to vary according to household characteristics,family characteristics,and regional characteristics.Digital inclusive finance has a strong effect on increasing agricultural output for households whose household heads are female,have lower levels of education and are older,as well as households with lower level of average education,physical capital,and social capital.Moreover,digital inclusive finance has a more significant effect on promoting agriculture in areas where agricultural industry accounts for a higher proportion or that belong to major grain-producing areas or non-flat areas.Mechanism analysis shows that digital inclusive finance can alleviate financial constraints,information constraints,and market participation opportunity constraints,through which it increases investment in agricultural production materials and labor inputs,and thus promotes agricultural output.Further analysis shows that an increase of agricultural output can enhance household consumption.This research demonstrates that digital inclusive finance has an inclusive effect on agriculture,rural areas,and farmers,which supports the development of the agricultural industry and the rural revitalization strategy.Fourthly,an empirical study from the perspective of residents’consumption reveals the economic value effect of digital inclusive finance in increasing residents’consumption.Using the collected and transported domestic garbage as a proxy for residents’consumption,the study finds that digital inclusive finance directly enhances residents’consumption level through payment facilitation,risk management,wealth management,and online shopping channels,as well as indirectly through income growth channel.The study also identifies heterogeneity in the impact of different dimensions of digital inclusive finance on consumption,with coverage breadth and usage depth having statistically significant impact,and digital degree having no significant impact.Additionally,digital inclusive finance plays a stronger role in promoting consumption in the eastern region compared to the central and western regions in China.The study also reveals the impact of digital inclusive finance on consumption is stronger in regions with higher levels of economic development,traditional financial development,internet popularity and human capital endowment.This research suggests that digital inclusive finance has the potential to boost residents’consumption,expand domestic consumption demand,and promote the formation of the domestic cycle.Fifthly,empirical research reveals the environmental value effect of digital inclusive finance in promoting green development,from the perspectives of urban air quality and carbon emissions.This study finds that digital inclusive finance plays a significant role in reducing air quality and carbon emissions,which the thesis calls respectively the inclusive effect and green effect of digital inclusive finance on environment.Mechanism analysis indicates that digital inclusive finance results in the deterioration of air quality by promoting the consumption and the related production among long-tail customers,leading to an increase in domestic garbage and employment in the private sector.However,it also reduces carbon emissions through a decrease in electricity consumption.Further analysis indicates that digital inclusive finance has resulted in an increase in ozone（O₃）concentration,providing further evidence of its negative impact on air quality,and that through the promotion of technological progress and the upgrading of industrial structures,digital inclusive finance achieves energy conservation and carbon emission reduction.Thus,the study demonstrates that digital inclusive finance has both inclusive and green effects on the quality of the environment,holding great potential for promoting green and low-carbon development.Finally,to sum up,digital inclusive finance influences the allocation of bank credit via spillover and extrusion effects.It enhances the provision of financial services to weak sectors such as agricultural and residential sectors,subsequently improving financial inclusion,and promoting both agricultural production and residential consumption.The impact of digital inclusive finance on green development is apparent in the increase of air pollution through the advancement of consumption and employment in the private sector,and diminution of carbon emissions by fostering technological progress and upgrading industrial structure.The above research constitutes the value effect system of the“financial value effect–economic value effect–environmental value effect”of digital inclusive finance studied in this thesis.Based on the above findings,this thesis proposes several policy recommendations to maximize the value effect of digital inclusive finance in implementing the new development philosophy and fostering high-quality development:（1）Emphasize high-quality development and pursue the normative,healthy,and sustainable growth of digital inclusive finance.（2）Encourage innovation in digital inclusive finance and facilitate the digital transformation of the financial industry.（3）Strengthen the enabling effect of digital inclusive finance to support rural revitalization.（4）Promote the widespread adoption of digital inclusive finance to enhance residents’consumption demands.（5）Enhance policy coordination in finance to facilitate the integration of digital inclusive finance and green finance.This thesis contributes to the existing literature in several ways.Firstly,it establishes a systematic analysis framework for the value effects of digital inclusive finance,focusing on its financial,economic,and environmental value effects.This framework provides theoretical support for understanding the value of digital inclusive finance and harnessing its positive impact.Secondly,the thesis conducts empirical research from various perspectives,including commercial bank credit,agricultural production,residents’consumption,and green development,offering abundant empirical evidence on the value effects of digital inclusive finance.Finally,based on the findings from theoretical analysis and empirical research,this thesis presents targeted policy recommendations to further advance the development of digital inclusive finance and promote high-quality development.