How does digital finance affect imports, exports and trade balance: Evidence from China

Abstract

This paper investigates how digital inclusive finance affects imports and exports as well as foreign trade balance by incorporating the mediating effect of technological innovation and the moderating effect of identified factors. Using panel data from 31 provinces and regions in China, we find robust evidence that digital inclusive finance has a significant and positive effect on China's trade performance, with technological innovation being the important mediator and marketization, industrial structure transformation and upgrading, economic development and financial regulation as the effective moderators. Such effect is found more striking for the central and western regions, confirming the presence of regional heterogeneity. The findings have important policy implications for China's new high-quality development model and digitalization strategy unveiled in 2023.

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