Inclusiveness and Competitiveness Performance of Digital Financial Inclusion: From the Perspective of Regional Inequity

Abstract

With China's rapid economic development, disparities within provinces have increased, leading to significant regional inequality. The goal of financial inclusion is to provide financial services to lag-behind regions and disadvantaged groups to promote economic growth and enhance competitiveness. Further investigation is needed to determine whether digital financial inclusion has contributed to greater inclusion or aggravated regional inequality due to the digital divide. The main aim of this study is to examine the inclusive effects and competitiveness gains of digital financial inclusion from the perspective of regional inequality. By analyzing 23 Chinese provinces from 2011 to 2019 through the panel fixed effects model, the results support the existence of a digital divide, which creates regional inequality. Further analysis of the moderating effects reveals that the elimination of the digital divide by digital competitiveness reduces the effect of regional inequality's impact on digital financial inclusion. The advantages of digital financial inclusion to improve competitiveness are already beginning to emerge. This paper reveals that digital financial inclusion has a non-linear threshold effect. At a time of rapid growth in digital financial inclusion, it is crucial to be aware of the inequalities brought on by the digital divide and, more importantly, to capture the beneficial effects of digital competitiveness to enhance regional competitiveness.