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

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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)

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.

Suggested Citation

  • Jinlong Lin & Xiaoxiao Chen & Guiquan Yan, 2023. "How Smart City Construction Affects Digital Inclusive Finance in China: From the Perspective of the Relationship between Government and Large Private Capital," Sustainability, MDPI, vol. 15(11), pages 1-17, June.
    • Handle: RePEc:gam:jsusta:v:15:y:2023:i:11:p:9035-:d:1162992
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