The Role of Digital Financial Inclusion in Promoting Entrepreneurship in China: A Provincial Perspective

Abstract

This study examines the impact of DFI on entrepreneurship in China and across its regions (i.e., rural and urban) using province-level panel data from 2011 to 2019. Digital financial inclusion (DFI) serves as a catalyst for entrepreneurship by giving access to financial services. Entrepreneurs, both in urban centers and rural areas, gain fair and equitable platforms by unlocking opportunities for growth and innovation through the use of technology. We employed fixed effect Driscoll-Kraay standard errors (FE-DKSE) and feasible generalized least squares (FGLS) techniques for empirical analysis. The findings showed that there is an N-shaped relationship between the DFI and entrepreneurship in China and across its regions (i.e., rural and urban). Our estimates are robust and insensitive to the inclusion of other control variables such as economic growth, urbanization and trade openness. Economic growth and trade openness have a positive and significant impact on entrepreneurship, and a negative relationship between urbanization and entrepreneurship. The policy insinuation is that the government needs to actively expedite the growth of DFI and establish a favorable external environment for entrepreneurship. To enhance the attainment of entrepreneurial targets, it is essential to adapt DFI policies according to regions.