The Impact of Digital Finance on Import and Export Trade in 31 Provinces in China: A PVAR Model Approach

Abstract

This paper provides an analysis of the current state of digital finance in China and the import and export trade situation in 31 provinces. Through an examination of relevant literature, the article identifies the different stages of development that digital finance has undergone in China. To further explore the relationship between digital finance and import or export trade, a PVAR model was constructed. In this model, the Digital Inclusive Finance Index (2011-2020) calculated by the Peking University Digital Finance Center research group was used as the core explanatory variable, while the import and export trade volume of 31 provinces and cities (excluding Hong Kong, Macao, and Taiwan) were selected as the explained variable. Our findings suggest that: (1) the current state of foreign trade is relatively mature and in a period of high-quality development and transformation, and digital inclusive finance is in the high growth period. (2) the development of digital finance has little impact on the development of foreign trade, while the development of foreign trade will make significant effects of digital inclusive finance. Based on these conclusions, we provide policy recommendations to achieve common prosperity through the use of digital finance and foreign trade.