Impact of digital infrastructure construction on financial development: Evidence from the "broadband China" Strategy

The "Broadband China" has enabled China to achieve leapfrog development in the construction of its high-speed broadband networks, thereby accelerating the development of digital infrastructure and unleashing the potential for financial sector growth. This has created a strong impetus for economy to shift towards high-quality development. An in-depth understanding of the empirical correlation between the development of digital infrastructure and financial progress is absent, leaving an unexplored domain of research concerning the impact of the "Broad China" strategy on financial agglomeration (Finagg), financial scale (Finscal), and digital finance (Digfina). In order to evaluate the dynamic impacts of this policy on financial development, this research builds a multi-period difference in differences (DID) model using panel data from 269 prefecture-level cities between 2011 and 2020. The study concludes that the "Broadband China" policy significantly fosters the growth of Finagg, Finscal, and Digfina, in China, and found that the "Broadband China" policy has a significant impact on the regional heterogeneity of financial agglomeration and digital finance. There are significant variations in the effects of this policy on different regions, while the regional heterogeneity differences in the impact on financial scale are relatively small. Additionally, the three mediating variables of technological innovation, fund support, and talent agglomeration play a mediating role in the mechanism of digital infrastructure on financial development.