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Research on the Threshold Effect of Internet Development on Regional Inclusive Finance in China

Author

Listed:
  • Chenjing Zhang

    (School of Economics and Management, Xianyang Normal University, Xianyang 712000, China)

  • Qiaoge Li

    (School of Economics and Finance, Xi’an Jiaotong University, Xi’an 710061, China)

  • Di Mao

    (Business School, University of Essex, Colchester CO4 3SQ, UK)

  • Mancang Wang

    (Finance and Data Science School, Xi’an Eurasia University, Xi’an 710199, China)

Abstract

The study aims to investigate how the internet has affected China’s financial inclusion from the standpoint of developing internet technologies. Firstly, using the coefficient of variation method and the principal component analysis method, the financial inclusion index (IFI) and the internet development index (INT) were built from multiple dimensions based on the 2006–2016 provincial panel data of China. Then, the fixed-effect panel threshold model, the fixed-effect estimate, and the 2SLS estimate were used to empirically test the impact of internet development on inclusive finance in China. We found that China’s financial inclusion was significantly and positively affected by internet development. Additionally, this effect was nonlinear, and there was a threshold effect on the proportion of internet users. The development of the internet had a significant positive effect on financial inclusion when the internet user proportion (ISP) was higher than 19%, and the effect on IFI became stronger when ISP rose above 53%. This study complements earlier research, in which internet finance is usually perceived as a composite notion, by thoroughly examining the effects of internet information technology on the growth of financial inclusion. Based on our findings, we further put forward policy recommendations for the sustainable development of inclusive finance in terms of the intelligent integration and collaboration of internet communication technologies. Financial inclusion is critical for achieving sustainability because it provides access to affordable financial services to underserved individuals and businesses, and brings them into the formal financial sector, thereby improving their livelihoods while reducing poverty and inequality.

Suggested Citation

  • Chenjing Zhang & Qiaoge Li & Di Mao & Mancang Wang, 2023. "Research on the Threshold Effect of Internet Development on Regional Inclusive Finance in China," Sustainability, MDPI, vol. 15(8), pages 1-20, April.
    • Handle: RePEc:gam:jsusta:v:15:y:2023:i:8:p:6731-:d:1124941
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    References listed on IDEAS

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