The spatial effect of financial openness on high-quality economic development: Evidence from provincial-level data in China

Serious environmental pollution challenges have compelled policymakers to replace China's previous crude rapid economic development model with high-quality economic development (HQED) to promote sustainable social progress. Since finance is the core of the modern economy, financial openness (FOPEN) may affect China's HQED. This study uses provincial-level data from 2007 to 2020 as a research sample to examine the relationship between the FOPEN and HQED. We construct indicator models for HQED and FOPEN and analyze the resulting spatiotemporal evolutionary features applying the Dagum Gini coefficient and kernel density estimation. We observe significant overall differences between HQED and FOPEN, which are mainly interregional in origin. In addition, HQED and FOPEN exhibit opposing dynamic evolutionary features, revealing that the polarization of the former (latter) is becoming progressively larger (smaller). With the spatial Durbin model, we demonstrate that FOPEN exerts a positive (negative) direct (indirect) impact on HQED. The subsample test indicates that the influence of FOPEN in the eastern and central regions is similar to the entire sample, while it has only a direct impact in the western region. These findings are validated by a series of robustness tests. Finally, our threshold effect analysis shows that FOPEN has a stronger promotional impact on HQED in regions with more advanced and rational industrial structure. The findings of this study suggest the policymakers should apply supporting policies to enhance the promotional direct effect and relieve the inhibiting indirect effect of FOPEN, and rationally plan local industrial structure upgrading, so as to more efficiently promote HQED.