How does digital finance affect industrial structure upgrading? Evidence from Chinese prefecture-level cities

Area of Science:

• Economics
• Financial Technology
• Regional Development

Background:

• Digital finance is a key driver of economic development.
• Understanding its impact on industrial structure is crucial for policy.
• China's rapid digital finance growth provides a unique case study.

Purpose of the Study:

• To investigate the effect of digital finance on industrial structure upgrading in Chinese cities.
• To explore the mediating mechanisms and spatial spillover effects of digital finance.
• To identify regional heterogeneity in the impact of digital finance.

Main Methods:

• Panel data analysis from 289 Chinese prefecture-level cities (2011-2020).
• Application of fixed effects, mediating effects, and spatial econometric models.
• Robustness checks to validate findings.

Main Results:

• Digital finance significantly promotes industrial structure upgrading.
• Positive spatial spillover effects observed between digital finance and industrial upgrading.
• Indirect effects mediated through innovation, entrepreneurship, and household consumption structure.
• Impact is stronger in cities with developed economies, lower financialization, and less income inequality.
• Breadth of digital finance coverage is the most influential sub-indicator.

Conclusions:

• Digital finance is a potent catalyst for industrial transformation in China.
• Policy interventions should focus on expanding digital finance infrastructure, particularly in less developed areas.
• Targeted strategies can leverage digital finance to foster innovation and entrepreneurship for structural upgrading.