Green Finance and Urban Land Green Transformation: Evidence from China

Green finance (GF) is increasingly seen as an important policy tool for promoting sustainable urban development; however, its role in facilitating the green transformation of urban land remains insufficiently understood, particularly from the perspectives of land use efficiency and spatial interactions. This study takes China’s Green Finance Reform and Innovation Pilot Zones as a quasi-natural experiment and employs a spatial difference-in-differences framework to examine whether and how GF affects urban land green use efficiency (LGUE). The results indicate that GF significantly improves LGUE in pilot cities, and this finding remains robust across a range of alternative specifications and robustness checks. The mechanism analysis further suggests that GF enhances LGUE primarily by optimizing resource allocation, promoting green innovation, and strengthening information disclosure. In addition, digital development is found to reinforce the positive effects of GF. Compared with existing studies, this paper integrates mechanism analysis with spatial econometric methods to provide a more comprehensive understanding of both the transmission channels and spatial spillover effects of GF. In particular, it provides new evidence on geographically constrained negative spillover effects across cities. The results further indicate that such spillover effects are most pronounced within a 250 km radius, suggesting that GF induces localized inter-city competition and resource reallocation. This finding offers empirical support for understanding the effects of GF from a spatial competition perspective. This study highlights the necessity of coordinating regional policy design to mitigate spatial spillover effects and improve the overall effectiveness of green finance policies.