The Impact of Fintech on Economic Growth: Evidence from China

Abstract

Financial technology (fintech) has seen fast development recently in China; however, studies exploring the contributions of fintech to China’s economic growth remain limited. Thus, this study motivated by the knowledge gaps and fast expansion of fintech examined: (i) the impact of fintech and the submeasures of third-party payment, credit, and insurance on China’s economic growth; (ii) the regional and provincial impact of fintech on China’s economic growth; (iii) the causality relationships between fintech and economic growth. By using a sample of 31 provinces in China and the instrumental variable generalized method of moments (IV–GMM) technique, the study established the following: (i) fintech and the submeasures of third-party payment, credit, and insurance have a statistically significant positive effect on China’s economic growth. Specifically, a 10% rise in fintech, third-party payment, credit, and insurance raises China’s economic growth by 8%, 4%, 5%, and 16%, respectively; (ii) the eastern region has the highest growth effect of fintech. Moreover, Zhejiang province has the highest growth effect of fintech at the provincial level; (iii) a unidirectional causality exists from third-party payment and credit to economic growth, and economic growth to insurance; a bidirectional causality exists between fintech and economic growth. This article explicitly suggests substantial institutional reforms to promote the healthy development of fintech in China.