The Penetration of Digital Currency for Sustainable and Inclusive Urban Development: Evidence from China’s e-CNY Pilot Using SDID-SCM

Against the backdrop of China’s fast-growing digital economy and its financial inclusion agenda, there is still little city-level evidence on whether the e-CNY pilot accelerates financial deepening at the grassroots. Using a balanced panel of 271 prefecture-and-above cities for 2016–2022, this study employs a staggered difference-in-differences (SDID) design augmented by the synthetic control method (SCM) to rigorously identify the policy effect of the e-CNY pilot. The results show that the pilot program significantly improves urban financial inclusion, contributing to more equitable access to financial services and supporting inclusive socio-economic development. Mechanism analysis suggests that the effect operates mainly through two channels, a merchant-coverage channel and a transaction-scale channel, with the former contributing the majority of the overall effect. Incorporating a migration-based mobility index shows that most studies’ focus on the merchant-coverage effect is amplified in cities under tight mobility restrictions but wanes where commercial networks are already saturated, whereas the transaction-scale channel is largely insensitive to mobility shocks. Heterogeneity tests further indicate stronger gains in non-provincial capital cities and in the eastern and central regions. Overall, the study uncovers a “penetration-inclusion” network logic and provides policy insights for advancing sustainable financial inclusion through optimized terminal deployment, merchant incentives, and diversified scenario design.