The "Trade Engine" Effect of Digital Financial Inclusion: Evidence from China's Provincial Panel Data

With its distinct advantages in digital technology, digital financial inclusion has opened new avenues for the growth of China's foreign trade. It has emerged as a vital and indispensable force in driving the sector's advancement. Based on panel data from 30 provinces in China from 2011 to 2022, this paper explores the impact of digital financial inclusion on China's foreign trade development. The findings demonstrate that digital financial inclusion significantly contributes to the growth of China's foreign trade. Moreover, marketization and stronger financial supervision further amplify its positive impact. A deeper analysis reveals that digital financial inclusion has a more pronounced effect in the central and western regions compared to the eastern region. Additionally, the breadth of coverage, depth of services, and level of digitization in digital financial inclusion all play a crucial role in accelerating the development of China's foreign trade. In light of these findings, the Chinese government should prioritize the advancement of digital financial inclusion by strengthening supportive policies and enhancing the legal framework. By doing so, it can fully leverage digital financial inclusion’s potential to drive the growth of China’s foreign trade.