Nexus between green finance, fintech, and high-quality economic development: Empirical evidence from China
1.Introduction
In recent years, China has achieved fast economic growth, while the issues of excessive resource consumption and environmental pollution becoming increasingly serious . Fossil energy use accounts for 70% of Chinarsquo;s energy consumption, resulting in a large amount of emission of pollutants detrimental to both human health and the ecosystem. To this end, Chinese government has shifted economic development goal of fast economic growth into high-quality economic development . Importantly, green finance as a financial strategy plays a critical role in guaranteeing the sustainable development of the economy and ecological environment, which has been widely adopted within China and worldwide (Akomea-Frimpong et al., 2021; Cheung and Hong, 2020; Sachs et al., 2019). Green finance aims to provide investment, financing, operating funds, and other financial services for eco-friendly projects, with environmental protection as its core (Wang and Zhi, 2016; Zhou et al., 2020). Compared with traditional finance, green finance pays more attention to environmental interests. It views environmental protection and the effective use of resources as important criteria for measuring the effectiveness of its activities.
Green finance concerns two hot topics, i.e., environment protection and finance, and its product has gained increasing attention and exhibited fast development in various fields in China . According to the statistics, Chinese issuers including banks, property developers, power generators, and railway operators sold 15.7 billion U.S. dollars of bonds during the first quarter period to fund green projects such as clean and renewable energy in 2021, which make China the world second-biggest bond market after the United States (Reuters, 2021). By the end of 2020, green loans in China totaled 1.8 trillion U.S. dollars (Xinhua, 2021). Carbon finance starts late but grows fast in China, and plays an important role in establishing a sound carbon trading market. Although green finance has become increasingly prominent for emerging economies, it is still unclear that the extent to which green finance contributes to high-quality economic development.
Considering the high demands of investment in green infrastructure, green finance is the solution for closing the green financial gap (Drsquo;Orazio and Popoyan, 2019; Hafner et al., 2020). While the concept of green finance is widely recognized, policymakers are knee to understand the role of green finance in achieving high-quality economic development and how to optimize green finance policy to further improve economic development. However, research in the field of green finance is still in the nascent stage with few related research. Particularly, there is a limited study investigating the mechanism of how green finance impacts the quality of economic development and providing empirical evidence for their relation. Further, there is a research gap regarding the involvement of fintech in green development. Therefore, it is necessary to clarify the impact of green finance in achieving the goal of promoting economic development and environmental improvement simulta neously and understand the role of fintech in the green finance context.
This study attempts to address these research gaps by examining the following research questions. (1) whether green finance can achieve the goal of high-quality economic development; (2) how does fintech affect the relationship between green finance and high-quality economic development. This study develops a green finance development index and uses a global principal component analysis (GPCA) method including five financial indicators: i.e., green credit, green securities, green insurance, green investment, and carbon finance. Further, highquality economic development evaluation indicators are also constructed following the principles of systematization and data availability. To test these relationships, we collect panel data comprising a sample of 30 provinces and municipalities in China from 2007 to 2019.
This research offers contributions to the literature on green finance in multiple ways and departs from previous studies in terms of the following aspects. First, it contributes by shedding light on green finance and responding to calls by scholars to examine the impact of green finance on high-quality economic development, as this research enhances the theoretical understanding of the extent to which green finance affects high-quality economic development. Specifically, we empirically examine the impact of green finance on multiple dimensions of high-quality economic development, while prior green finance research has focused mainly on a single environmental dimension of economic development (Jin et al., 2021; Wang et al., 2021a; Zhang et al., 2021b; Zhou et al., 2020). Second, this study also heeds a recent call to pay attention to the effect of fintech in the development of green finance (Muganyi et al., 2021). We find that whether and how fintech in affecting the relationship between green finance and high-quality development is under-researched. In this sense, we provide a more nuanced understanding of the development impact of green finance by establishing fintech as a moderator, thus revealing its indirect role in affecting the relationship between green finance and high-quality economic development. Finally, based on our research results, we offer multiple important policy implications for regulators to further improve economic development through managing green finance and fintech.
2. Literature review and hypotheses development
2.1. Literature review
Green finance refers to financial instruments that provide environmental benefits (IFC, 2017). Specifically, financial institutio
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