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

TLDR

Digital finance is increasingly prominent in economic development. This study examines how digital finance affects industrial structure upgrading in 289 Chinese prefecture‑level cities from 2011 to 2020. The study uses fixed‑effects, mediation, and spatial econometric models on panel data. Digital finance significantly boosts industrial structure upgrading, produces positive spatial spillovers, and indirectly promotes upgrading through innovation, entrepreneurship, and household consumption channels; its effect is stronger in more developed, less financialized, and lower‑inequality cities, with coverage breadth being the most influential sub‑indicator.

Abstract

Digital finance is playing an increasingly prominent role in economic development. This paper examines the impact of digital finance on industrial structure upgrading based on panel data from 289 Chinese prefecture-level cities from 2011 to 2020. The paper adopts fixed effects, mediating effects, and spatial econometric models and the findings are as follows. First, digital finance development significantly boosts industrial structure upgrading in Chinese cities. The evidence remains valid after various robustness tests. Second, digital finance and industrial structure upgrading exhibit positive spatial spillover effects. Third, digital finance indirectly affects industrial structure upgrading through innovation, entrepreneurship and the structure of household consumption channels. Fourth, the influence of digital finance is more significant in cities with more developed economies, less financialization and lower income inequality. Finally, among the sub-indicators of digital finance, the breadth of coverage plays the most significant role, inspiring policymakers and financial institutions to speed up the digitization infrastructure in backward areas.