Is FinTech making world more “inclusive”? Evidence from inclusive growth story of China

Financial technology (FinTech) functions as a world-recognized vital driver for high-quality development. Different from recent research that merely involves empirical studies of the correlation between FinTech and inclusive growth, we first employ mathematical model analysis to theoretically distinguish the underlying mechanism through which FinTech influences inclusive growth in China. Subsequently, we built a series of mathematical models to deconstruct three effects of FinTech on inclusive growth: entrepreneurship stimulation, human capital investment, and innovation promotion effect, followed by a re-examination of these mechanisms using panel data that covers 281 prefecture-level cities in China from 2011 to 2020. The empirical results show a solid positive impact of FinTech on inclusive growth in China. Further mechanism tests confirm that entrepreneurship stimulation, human capital investment, and innovation promotion serve as three plausible economic channels that account for this effect, supporting our theoretical conjecture. Moreover, we adopt machine learning algorithm to simulate different inclusive growth levels in China from 2021 to 2030 under different scenarios and therefore propose policy suggestions to bolster inclusive growth. Overall, these findings shed greater light on the FinTech-inclusive growth nexus and provide new insights into the real effects of FinTech on sustainable development in developing economies that bear resemblance to China.