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The effectiveness of China's fiscal subsidy policies in supporting the development of rural inclusive finance

Author

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  • Yin, Xiang
  • Chen, Yin-E
  • Chang, Chun-Ping

Abstract

In China, fiscal subsidies can promote financial inclusion, but there are still policy failures. This paper uses deterministic evolutionary game and stochastic evolutionary game model to analyze the effectiveness and boundary conditions of fiscal subsidy policy to support rural inclusive financial development. The study found that an evolutionarily stable strategy will emerge only when targeted fiscal subsidies can cover the initial operating costs of an inclusive financial system. In the deterministic evolutionary game, there are two stable evolutionary strategies on the demand side due to financial literacy and economic differences. In a stochastic evolutionary game, the system converges to the (default, loan) strategy, and random disturbances weaken the effectiveness of the policy. Reducing the rate of targeted financial subsidies, reducing the value of collateral, and increasing the amount of loans can improve the effectiveness of policies. According to the research results, policy recommendations are put forward.

Suggested Citation

  • Yin, Xiang & Chen, Yin-E & Chang, Chun-Ping, 2025. "The effectiveness of China's fiscal subsidy policies in supporting the development of rural inclusive finance," Economic Analysis and Policy, Elsevier, vol. 85(C), pages 392-406.
    • Handle: RePEc:eee:ecanpo:v:85:y:2025:i:c:p:392-406
    DOI: 10.1016/j.eap.2024.12.012
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    More about this item

    Keywords

    Fiscal subsidy policy; Rural inclusive finance development; Effectiveness; Deterministic evolutionary game; Stochastic evolutionary game;
    All these keywords.

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • Q14 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Finance

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