Title
Financial Technology Development and Regional Economic Growth in China: Evidence from Demand-Side Transmission Channels
Authors
Abstract
Purpose: This study examines whether financial technology (FinTech) development promotes regional economic growth in China and identifies the demand-side transmission channels through which this effect operates at the provincial level.
Design/methodology/approach: Using a balanced panel of 31 Chinese provinces from 2012 to 2020, the study measures FinTech development by the growth rate of the Peking University Digital Financial Inclusion Index and economic performance by the growth rate of gross regional product per capita. A HANK-informed framework motivates the focus on three demand-side channels: fixed investment, retail consumption, and exports. Two-way fixed-effects panel regressions are employed, supplemented by diagnostic tests, panel-corrected standard error robustness checks, and lagged-variable specifications.
Findings: The results show that FinTech development significantly promotes regional economic growth. A one-percentage-point increase in FinTech growth is associated with approximately a 0.022-percentage-point increase in per capita GDP growth. Channel decomposition reveals that fixed investment is the dominant transmission mechanism, accounting for about 23 percent of the total effect. In contrast, the retail-consumption and export channels are economically negligible. The remaining direct effect, accounting for roughly 75 percent of the total association, suggests the presence of additional unobserved mechanisms such as productivity gains, financial deepening, and entrepreneurship.
Implications: The findings highlight the importance of digital financial infrastructure in easing investment constraints and supporting capital formation as a pathway to regional growth. From a decision-science perspective, the results demonstrate how FinTech-driven financial innovation influences regional economic decision-making through investment, consumption, and export processes. However, the analysis is conducted at the provincial level and is limited to the period 2012-2020, which may mask within-province heterogeneity and does not capture post-pandemic developments. Future research could employ more disaggregated data and extended time horizons to further explore the mechanisms through which FinTech affects economic growth.
Originality/value: This study contributes to the decision sciences literature by being among the first to provide a quantitative decomposition of the regional growth effects of FinTech development across multiple demand-side transmission channels within a HANK-informed framework. The study further strengthens the empirical evidence through a comprehensive set of panel diagnostic and robustness tests.
Keywords
Financial technology, economic growth, transmission channels, panel data, digital financial inclusion, China
Classification-JEL
E22, E44, G23, O33, O47, R11
Pages
25-69
Special issue on
Decision Science in Sustainable Public Policy
How to Cite
TSANG, C. K., CHAN, K. L., & HUNG, T. H. (2027). Financial Technology Development and Regional Economic Growth in China: Evidence from Demand-Side Transmission Channels. Advances in Decision Sciences, 31(1), 25-69.