How Smart City Construction Affects Digital Inclusive Finance in China: From the Perspective of the Relationship between Government and Large Private Capital

Jinlong Lin, Xiaoxiao Chen () and Guiquan Yan ()
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Jinlong Lin: School of Marxism, Tsinghua University, Beijing 100084, China
Xiaoxiao Chen: School of Public Policy & Management, Tsinghua University, Beijing 100084, China
Guiquan Yan: School of Economics and Management, Huazhong Agricultural University, Wuhan 430070, China

Sustainability, 2023, vol. 15, issue 11, 1-17

Abstract: In China, the relationship between smart city policy (SCP) and the development of digital inclusive finance (DIF) partially mirrors the connection between the Chinese government and large private capital. This study examines this relationship using data from the Peking University Digital Financial Inclusion Index of China (PKU-DFIIC) and a difference-in-differences method. Results indicate that SCP may indirectly promote DIF in pilot cities, exhibiting statistically significant growth compared to non-SCP pilot cities. This promotion effect appears indirect, as negligible DIF digitization growth in SCP pilot cities suggests that the government’s objective is not to enhance large private capital-related digital infrastructure construction. Moreover, DIF in SCP pilot cities demonstrates a statistically significant increase only in the depth of use, not in coverage. This study implies that, in China, large private capital’s behavioral logic is profit-seeking, and SCP may be employed to facilitate digital financial services development. These findings uncover SCP’s complex impact on DIF in China and the strained government–capital relationship. The Chinese government should prudently manage its relationship with capital in public policies and direct capital toward a more constructive role.

Keywords: smart city policy (SCP); financial services; large private capital’s behavioral logic; China’s financial market; digital inclusive finance (DIF); Digital Financial Inclusion Index (DFII) (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2023
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