THE ROLE OF DIGITAL FINANCE IN SHAPING HOUSEHOLD CONSUMPTION IN CHINA

Abstract

 This study investigates the influence of digital finance on consumer behaviour, with particular attention to its effect on domestic consumption trends in China. Utilising extensive provincial panel data spanning the period from 2012 to 2022, the research employs both quantitative and qualitative methodologies to examine core attributes of digital finance, including its breadth of coverage, usage dimensions, and level of digitalisation. The findings indicate that digital finance significantly enhances household consumption by increasing income levels, mitigating income volatility, and easing liquidity constraints. Notably, the effects of digital financial services differ considerably across regions and demographic groups, with more pronounced benefits observed among higher-income populations and in provinces characterised by more sophisticated financial infrastructure and elevated levels of human capital. These outcomes highlight the critical role of expanding digital financial services and strengthening financial systems as strategic approaches to stimulate household expenditure and foster long-term economic development. The study provides valuable insights for both governmental authorities and private sector entities, suggesting that targeted policy interventions can harness the potential of digital finance to unlock consumer demand, narrow financial disparities, and support inclusive economic progress. Furthermore, it offers a foundational framework for future academic inquiry into the sustained and structural impact of digital finance on economic performance and financial development.